Maintained for Historical Purposes

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

Federal Pell Grant Program - Overpayments and Overawards

AwardYear: 1997-1998
EnterChapterNo: 4
EnterChapterTitle: Federal Pell Grant Program
SectionNumber: 6
SectionTitle: Overpayments and Overawards
PageNumbers: 69-74


OVERPAYMENTS

A Pell overpayment occurs any time the student receives a payment
that is greater than the amount for which the student is eligible.
Examples of the four most common types of overpayments are given
below.

[[Types of overpayments]]
1. Student error, such as failing to report the spouse's income on the
application.

2. School error, for instance, when a student's award is taken
incorrectly from the Payment Schedule, or when the school pays a
student who is not making satisfactory progress.

3. Required recalculations, such as when a student never begins
attending class or does not begin attending all of his or her classes,
or withdraws from school after receiving a disbursement for living
expenses. (See "Refunds and Repayments" in Chapter 3 for
repayment calculation.)

4. Optional payments, for instance, when the school makes an
interim disbursement to a student selected for verification, but the
student never completes verification.

[[34 CFR 690.79(a)(2)]]
No matter what the reason for the overpayment, it must be repaid. If
the overpayment is the result of a school error or an optional
payment, the school must repay the Pell account whether or not it
succeeds in collecting the overpayment from the student.

[[Continuing payments after overpayment]]
If a school has made an overpayment to a student, it may continue to
make payments to that student under certain circumstances:

- The overpayment can be eliminated within that award year by
reducing the student's subsequent Pell payments during the award
year;

- The school repays the overpayment itself. The student would then
owe an institutional debt, not a Pell overpayment, and would be
eligible for further Pell payments;

- The student makes arrangements to repay that are satisfactory to
the school;

- The student completely repays the overpayment.

Note that if the overpayment is due to the school's error, the school is
required to repay the overpayment promptly if it cannot collect the
overpayment from the student. As noted above, once the school
repays the overpayment, the student is eligible for further aid.

If the overpayment is not the school's fault (for instance, the student
made a mistake on the application, or the school had no information
indicating that the student attended another school), the school may,
but is not required to, repay the Pell account for the student. If the
school does not repay the overpayment, and the student will not
agree to repay, the school is not liable to the Department, but must
make a reasonable effort to contact the student and collect the
overpayment.

Note that a school may not reduce a student's Pell award from the
current award year to eliminate a Pell overpayment from a previous
award year. For example, if a student received an overpayment in
1996-97, a school may not reduce any portion of the student's 1997-
98 Pell award to eliminate the overpayment.

FINANCIAL AID TRANSCRIPTS

If a student transfers from School A to School B and receives an
overpayment at School B because School A completed the student's
financial aid transcript improperly, School A may be subject to a fine
or other adverse action. School B will not be liable for the
overpayment but is responsible for attempting to collect it from the
student.

[[34 CFR 668.19(a)(3)(ii)]]
If School A requests a financial aid transcript from School B but has
not received it, School A may make a Pell disbursement to the
student for only one payment period. School A would not be liable
for an overpayment unless it made payments for more than one
payment period.

[[School has closed]]
If School A cannot obtain a financial aid transcript from School B
because that school has closed, School A may get the financial aid
history from NSLDS or request assistance from the Department by
writing to--

Federal Student Aid Information Center
Financial Aid Transcript Request
P.O. Box 4129
Iowa City, Iowa 52244

(See Chapter 2, Section 2 of this handbook for more information on
financial aid transcripts.)

REPORTING OVERPAYMENTS COLLECTED

If a school collects or repays an overpayment for the current award
year, it reports the decrease in the student's award using its normal
reporting method (EDE, RDE, or Floppy Disk Data Exchange). The
school may also use these methods to report a decreased award after
the general September 30 payment data submission deadline; for the
1997-98 award year, decreased award reports will be processed at
least through January 31, 1999.

[[Reporting an award decrease after September 30]]
For reporting decreases after September 30, the school may also use
the "Decrease Award Report," provided in "Dear Colleague" Letter
P-96-4, dated October 1996. The school should use a separate report
for each award year for which it needs to report an award reduction;
the school's total Pell expenditure figure must always be included.
The business office must also report its corrected total Pell
expenditure figure on its Federal Cash Transaction Report (ED/PMS
272A) (see the instructions in Chapter 6 of the Recipient's Guide to
the Payment Management System) or through its successor reporting
mechanism in EDCAPS.

[[Overpayments from a prior award year]]
If a student repays a Pell overpayment for a prior award year, the
school must deposit the funds in its institutional federal funds or Pell
account and report the decrease in the student's award to the Federal
Pell Grant Program. The funds can then be used for current year
disbursements. See Section 7 of this chapter for more information on
reporting decreased awards.


PROBLEMS IN COLLECTING OVERPAYMENTS

[[Referrals to the Department]]
The school must notify the Department's Debt Collection Service
(DCS) if it has serious difficulty in collecting an overpayment from a
student: for example, if the school cannot contact the student or the
student is uncooperative, or if the school establishes a repayment
plan and the student refuses to pay or discontinues payments. If the
school is unable to recover or eliminate an overpayment that is not
the school's fault, the school must refer the student's case to DCS for
collection. (Referral procedures for overpayments are discussed in
the Verification Guide.)

[[Effect on eligibility for other SFA Programs]]
After the Department has received the school's information, collected
the overpayment from the student (if possible), and resolved the
case, it will notify the school by letter of the results. Please note that
until the Department has reached a final resolution of the referred
case, the school may not make any further payments to that student
under any SFA Program.

A student who owes a Pell overpayment that has been reported to the
Department and who subsequently submits a FAFSA will be
informed that he or she is not eligible for additional federal aid until
the overpayment is repaid in full. NSLDS will show for all such
students that a Pell overpayment is owed to the Department. A "C"
will be printed on the output document next to the EFC to indicate
that the school must resolve the issue before paying the student.

PREVENTING OVERAWARDS

The Pell is regarded as the first source of assistance to the student
and thus is not adjusted to take into account other aid, even if the
student's combined aid package exceeds the student's need.*1*

[[Adjusting campus-based aid]]
The aid administrator is responsible for preventing an overaward by
adjusting the aid the school controls. For example, if the student is
receiving campus-based aid in addition to a Pell, the campus-based
aid must be adjusted to prevent an overaward. The sum of the
student's EFC, Pell, campus-based aid, and any other aid and
resources may not exceed the student's COA. (See Chapter 2.)

[[The example on page 4-73 is currently unavailable for viewing. Please
reference your paper document for additional information.]]

As mentioned in Section 4, if the student's aid package includes a
loan and the package must be adjusted to prevent an overaward, the
Pell may not be used to pay back the loan--a loan repayment does not
constitute an educational expense.

[[Estimated financial assistance]]
In addition to adjusting any campus-based aid, schools are required
to include an estimate of the student's Pell eligibility as part of the
student's estimated financial assistance (EFA) when certifying a
Federal Stafford or Direct Loan application. (See Chapters 10 and 11
for further information.)

[[NCAA rules for student athletes]]
The National Collegiate Athletic Association (NCAA) has rules
limiting the amount of aid student athletes may receive. However,
the law does not permit schools to adjust students' Pells. STUDENT
ATHLETES MUST RECEIVE THE FULL AMOUNT OF ANY
PELL FOR WHICH THEY ARE ELIGIBLE. If the student's
potential aid plus the student's Pell exceeds the NCAA limits, the
school must reduce any aid over which it has control, not the Pell.


*1* Although a Pell could be adjusted if the student received funds
under the Paul Douglas Teacher Scholarship Program, this program
has not been funded for the 1997-98 award year (see Chapter 9).

Last Modified: 07/28/1998