Maintained for Historical Purposes

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

Student Eligibility and Financial Need - Overview of Financial Need

AwardYear: 1997-1998
EnterChapterNo: 2
EnterChapterTitle: Student Eligibility and Financial Need
SectionNumber: 3
SectionTitle: Overview of Financial Need
PageNumbers: 53-68


A student must demonstrate financial need to receive all Student
Financial Assistance (SFA) except for unsubsidized loans under the
Federal Family Education Loan (FFEL) Program and the Direct
Loan Program. These loans include unsubsidized Federal Stafford
Loans, Federal PLUS Loans, Direct Unsubsidized Loans, and Direct
PLUS Loans. Unlike scholarship programs that may award funds
based on academic merit or based on the student's field of study,
SFA Program aid is administered based on the family's need for
assistance.

[[The "Financial Need" graphic on page 2-53 is currently unavailable
for viewing. Please reference your paper document for additional
information.]]

Financial need is simply defined as the difference between the
student's cost of attendance (COA) and the family's ability to pay
these costs. Note that the student's financial need will be reduced by
aid that is awarded to the student.

Education costs for the SFA Programs are defined by statute and are
fairly easy to calculate based on the student's tuition and fee charges,
living situation (e.g., on campus, off campus with parents, off
campus without parents), as well as other factors affecting the
student. However, the student's ability to contribute toward these
costs, as measured by the Expected Family Contribution (EFC), is
much more complicated to assess.

This section examines the concepts related to financial need. The
section first discusses family contribution analysis. Discussion of the
COA follows; then overawards and financial aid packaging are
addressed

EXPECTED FAMILY CONTRIBUTION

The EFC is the amount that a family can reasonably be expected to
contribute toward college costs. The EFC is based on an analysis of
the family's financial strength, including the income and assets of the
student and the student's spouse or--if the student is dependent--the
student and his or her parents. The EFC formula also considers
factors such as the number of persons in the household, the number
of those persons attending college, and the special costs of families
in which both heads of household work. For more information on
how the EFC is calculated, see The EFC Formula Book, 1997-98.
You may order a copy by calling the Federal Student Aid
Information Center at 1-800-4-FED-AID.

[[Maximum EFC: 2500]]
If the EFC is less than the COA (in other words, if the student's
family cannot be expected to contribute the full costs faced), the
student is considered to have financial need. In the case of eligibility
for a Pell Grant, however, a maximum eligible EFC is determined
annually. Although a student whose EFC exceeds the maximum may
have financial need, he or she is not eligible for a Pell Grant. For
1997-98, the maximum EFC that a student may have to qualify for a
Pell Grant is 2500. As long as the EFC is less than the cost of
attendance, the student will remain eligible for aid from other SFA
Programs, provided that he or she meets the other eligibility
requirements of those programs.

[[Simplified needs test]]
Some students will have more than one EFC calculated. The CPS
will calculate a simplified EFC for a student who meets certain
income and tax-filing requirements. When an applicant meets the
requirements for a simplified needs test, family assets are not
considered in the calculation; therefore, the student does not need to
provide this information on the application. If the student does
provide the information on family assets, however, the CPS will
calculate two EFCs--a Primary EFC, which uses the simplified
formula, and a Secondary EFC, which uses the full formula. In all
cases, the Secondary EFC will be equal to or higher than the Primary
EFC. The financial aid administrator may use either figure to
determine eligibility for aid from any SFA Program.

[[EFC for 9-month enrollment]]
[[EFC for other than 9-month enrollment]]
The EFC found in the upper right hand corner of the first page of the
output document is based on a 9-month enrollment period and should
always be used for awarding a Pell Grant, even if the student is
attending for a longer or shorter period. The second section of the
FAA Information area contains headings for the number of months,
Primary EFC, and Secondary EFC, as well as a table of 1- to 12-
month alternate EFCs. The figures in the table represent alternate
EFCs that the financial aid administrator may use to award aid--other
than Pell Grants for which the 9-month figure is always used--if the
student is attending for less than or greater than the standard 9-month
period. For dependent students, the alternate EFCs for periods of
attendance other than 9 months are calculated by the CPS according
to a formula prescribed in the HEA. For independent students, the
law does not specify the adjustments, so the CPS performs a simple
proration of the EFC by month for the convenience of the financial
aid administrator.

Note that if only a Primary EFC appears in this area, either the
student has not met the simplified-formula criteria (based on income
or tax-filing status) or the student met the criteria but did not supply
sufficient asset information to permit a Secondary EFC calculation.

[[Special circumstances]]
If the student has special circumstances not taken into account by the
EFC formula, the financial aid administrator may use professional
judgment to adjust--on a case-by-case basis--the value of specific
data reported on the student's SAR. Special circumstances are
conditions that differentiate an individual student, not conditions that
exist for a whole class of students. Adjustments may increase or
decrease a student's specific data item used to calculate the EFC or
used in calculating the COA. For example, if a dependent student's
parent had been retired since 1996 and, thus, the family expected to
have a lower income for 1997, the financial aid administrator might
use professional judgment to adjust the parents' income. The reason
for an adjustment must relate to that student's special circumstance
and must be documented in the student's file. For more information
on the use of professional judgment, see The Counselor's Handbook
for Postsecondary Schools and the discussion on "Professional
Judgment" that appears later in this section.

One of the most significant decisions in need analysis concerns
whether the student should be treated as a dependent student or as an
independent student (in other words, whose ability to contribute
should be analyzed?). If the student is considered to be dependent on
his or her parents, information on the income (and assets, if
applicable) of the parents must be collected on the financial aid
application, and a parental contribution will be added to the student's
contribution to determine the EFC.

[[Independent student definition]]
For the 1997-98 award year, a student is automatically independent if
he or she meets one of the following criteria. Complete definitions of
these criteria can be found in the 1997-98 Free Application for
Federal Student Aid.

1. The student was born before January 1, 1974.

2. The student is a veteran of the U.S. armed forces.

3. The student will be enrolled in a graduate or professional
program (beyond a bachelor's degree).

4. Either the student is a ward of the court (or was a ward of the
court until age 18), or both parents are deceased and the student
has no adoptive or legal guardian. Note that a student is not
considered a ward of the court based only on being incarcerated.

5. The student is married (this definition may depend on the
common law rules in the student's state of legal residence).

6. The student has legal dependents other than a spouse.*1*

Note that a student's living situation (that is, whether the student lives
with his or her parents) does not affect the student's dependency
status.

In unusual circumstances, a student who does not meet any of these
criteria may still be considered to be independent on the basis of the
financial aid administrator's professional judgment. The financial aid
administrator must make this decision on an individual (case-by-
case) basis and must document the reason(s) for the decision. The
Counselor's Handbook provides information on the proper
procedures for performing a dependency override.

Bear in mind that the aid administrator may use professional
judgment only to classify as independent a student who would
otherwise be considered dependent. An aid administrator cannot
require a student who meets one of the criteria for independence to
file as a dependent. However, the financial aid administrator may
adjust an independent student's assets or income to include a parental
contribution if the aid administrator decides that such a contribution
is warranted. Again, any such individual determination must be
documented in the student's file.

PROFESSIONAL JUDGMENT

Although aid administrators have asked the Department to provide
guidance on making professional judgment decisions, the
Department historically has given only limited advice. Following are
guidelines regarding this inherently subjective process.

The only areas where the law allows aid administrators to apply
professional judgment are: Independent student status, calculation of
expected family contribution, calculation of cost of attendance,
satisfactory academic progress, and denial or reduction of eligibility
for FFELs or Direct Loans.

The aid administrator may NOT exercise professional judgment to
waive general student eligibility requirements or to circumvent the
intent of the law or regulations. The Department specifically
prohibits the use of professional judgment to change FSEOG
selection criteria. Nor can the aid administrator include post-
enrollment activity expenses in the student's COA. (For example,
professional licensing exam fees are not allowable costs.)

Occasionally aid administrators make decisions contrary to the
professional judgment provision's intent. These UNREASONABLE
judgments have included, for example, the reduction of EFCs based
on reoccurring costs such as vacation expenses, tithing expenses, and
standard living expenses (related to utilities, credit card expenses,
childrens' allowances, and the like). Aid administrators, whom the
Department grants significant latitude in exercising professional
judgment, are expected and required to make "REASONABLE"
decisions that support the intent of the provision. Note that the school
is held accountable for all professional judgment decisions made, and
that each decision must be fully documented.

COST OF ATTENDANCE (COA)

[[SFA Need = COA-EFC-aid from other sources]]
The cost of attendance (COA) is an estimate of a student's education
expenses for the period of enrollment. A student's financial need for
SFA Program funds (other than the Pell Grant) is equal to the
student's COA, minus his or her EFC, minus his or her Pell Grant
eligibility, minus financial aid from other sources. Another way to
express this formula is to say that the total aid the student may
receive from the SFA Programs and other sources (when added to
the student's EFC) may not exceed the student's COA. (However,
note that the Federal PLUS, the Direct PLUS, the unsubsidized
Federal Stafford, and the Direct Unsubsidized loan may be
substituted for the EFC, as described later.)

The components of the COA are the same for all SFA Programs.
However, in the case of programs of study or enrollment periods that
are less than or greater than the school's academic year, the COA for
purposes of loans and campus-based aid differs from the COA for
the Federal Pell Grant Program. The Pell costs are always prorated to
the costs for a full-time student for a full academic year, but the COA
for the other programs is based on the student's actual costs for the
period for which need is being analyzed. See Chapter 4 for more
information on Pell.

A student's COA generally is the sum of the following:

- The tuition and fees normally assessed for a student carrying the
same academic workload, including costs of rental or purchase of
equipment, materials, or supplies required of all students in the
same course of study.

- An allowance for books, supplies, transportation, and
miscellaneous personal expenses.

- An allowance for room and board (see the following chart).

[[The room and board chart on page 2-58 is currently unavailable for
viewing. Please reference your paper document for additional information.]]

- For a student with dependents, an allowance for costs expected to
be incurred for dependent care (during periods that include, but
that are not limited to, class time, study time, fieldwork,
internships, and commuting time for the student), the amount of
which should be based on the number and age of such dependents
and should not exceed reasonable cost in the community for the
kind of care provided.

[[Study abroad]]
- For study-abroad programs approved for credit by the student's
home institution, reasonable costs associated with such study.

[[Costs related to disabilities]]
- For a disabled student, an allowance for expenses (including
special services, personal assistance, transportation, equipment,
and supplies) reasonably incurred, related to the student's
disability, and not provided for by other agencies.*2*

[[Cooperative education]]
- For students placed in a work experience through a cooperative
education program, an allowance for reasonable costs associated
with such employment.

[[Origination fees and insurance premiums]]
- And, for students receiving SFA loans, the fees required to receive
them (for example, the loan fee for a Direct Loan or the
origination fee and insurance premium for a FFEL). Schools may
also include the fees required for nonfederal student loans (that is,
nonfederal loans that must be considered resources for the student
when packaging aid). In all cases, the school can either use the
exact loan fees charged to the student or an average of fees
charged to borrowers of the same type of loan at that school.

Exceptions to the Normal Cost of Attendance (COA) Allowances

Following are the exceptions to the normal COA allowances
discussed above:

[[Less-than-half-time status]]
- For students who are enrolled less than half time, only the costs
for tuition and fees and allowances for books and supplies,
transportation (but not miscellaneous expenses), and dependent
care expenses may be included as part of the COA.

[[Correspondence students]]
- Generally, the COA for a correspondence study student is
restricted to the costs for tuition and fees. However, if the student
is fulfilling a required period of residential training, the COA can
also include required books and supplies, an allowance for travel,
and room-and-board costs specifically incurred. (Note: a student is
not eligible to receive aid from the SFA Programs for
correspondence courses unless they are a part of an associate-,
bachelor's-, or graduate-degree program and unless the school
meets the criteria for the percentage of courses taught using this
medium. See Chapter 3 for more details.)

[[Incarcerated students]]
- The COA for incarcerated students is limited to tuition and fees
and required books and supplies. Bear in mind that an incarcerated
student is ineligible to receive an SFA loan; if a student is
incarcerated in a federal or state penal institution, he or she cannot
receive a Pell Grant (see Chapter 4).

[[Students receiving instruction by telecommunications]]
- In determining a student's COA, no distinction is made regarding
the mode of instruction, except that the cost to rent or purchase
equipment is excluded for students receiving instruction by
telecommunications. However, if the aid administrator, using
professional judgment, determines that instruction by
telecommunication substantially reduces elements of a student's
COA, the aid administrator must adjust the COA accordingly and
thereby reduce the student's eligibility for grants, loans, or work-
study assistance.

[[Special circumstances]]
- The financial aid administrator has the authority to use
professional judgment to adjust the COA for the SFA Programs on
a case-by-case basis to allow for special circumstances. Such
adjustments must be documented in the student's file. (See
"Professional Judgment" above.)

AWARD CALCULATIONS, RESOURCES, AND ESTIMATED
FINANCIAL ASSISTANCE

A basic premise of need-based aid is that the total package of aid
must not exceed the student's financial need. Aid in excess of need is
referred to as an overaward (see "Overawards" later in this section).
Because of differences in the way aid is handled in each of the SFA
Programs, there are differences in the way that each program takes
into account other sources of aid.

Determining Remaining Need

[[The "Pell Example" graphic on page 2-60 is currently unavailable
for viewing. Please reference your paper document for additional information.]]

[[Pell Grants]]
Pell Grants are considered to be one of the first sources of aid to the
student. The Department issues Pell Grant payment and disbursement
schedules that base the award solely on the student's COA, EFC, and
enrollment status. When awarding other sources of need-based aid,
the financial aid administrator must take eligibility for the Pell Grant
into account. It is always possible, however, that the student will
receive a scholarship or other aid that, in combination with the Pell
Grant, causes the student's financial aid package to exceed his or her
need. The school may not award additional need-based FEDERAL
aid that would cause the package to exceed the need. If the student's
need is exceeded due to the combination of the Pell Grant and other
sources of aid, the student is still eligible for the Pell Grant as
determined by the payment or disbursement schedule.*3*

[[Campus-based: resources]]
In contrast to the Pell Grant Program, the regulations for the campus-
based programs specifically require the school to take into account
all resources available to the student when funds are awarded from
these programs.

Such resources include the student's Pell Grant eligibility (whether or
not the student applies for a Pell Grant), subsidized Stafford Loans,
Direct Subsidized Loans, veterans benefits, outside scholarships, and
net earnings from NEED-BASED employment that will be received
during the award year. If the total of the student's EFC, resources,
and campus-based aid exceeds the student's COA, the campus-based
aid must be reduced to prevent an overaward. However, note that
there are overaward thresholds (discussed later in this section and in
Chapter 5, Section 2) for the campus-based programs.

[[The "Campus-Based Example" graphic on page 2-61 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

Suppose a student has a cost of attendance of $6,000, and an EFC of
1500. The student's resources are a $1,250 Pell Grant and a $1,750
outside scholarship. The school may award the student a $500
FSEOG and a $1,000 Perkins Loan to fully meet the student's
financial need.

[[Veterans benefits]]
For SFA purposes, veterans educational benefits are treated as
resources, not as income, and therefore are not reported as income on
the FAFSA. Note that the income earned from the Veterans
Administration Student Work-Study Allowance Program
(VASWSAP) is not treated as a veterans educational benefit, so it is
NOT considered a resource. It should be reported as untaxed income
(not income earned from work) on the FAFSA.

[[FFEL and Direct: estimated financial assistance]]
The statute governing the Federal Family Education Loan (FFEL)
Program (subsidized and unsubsidized Stafford, as well as PLUS)
and Direct Loan Program (Direct Subsidized, Direct Unsubsidized,
and PLUS) does not use the term "resources" as defined for campus-
based programs. Instead, a similar measure, called "estimated
financial assistance," is used for determining FFEL and Direct Loan
eligibility. Despite the different terminology, the two measures
include the same sources of assistance.

"RESOURCES" (for campus-based aid) AND "ESTIMATED
FINANCIAL ASSISTANCE" (for FFEL and Direct Loans)
includes (but is not limited to):

FEDERAL AID

Pell Grant eligibility,*
Gross Stafford Loan or Direct Loan funds received**
Campus-based aid (FSEOG, Perkins, FWS [less the direct costs
of employment])**

Veterans educational benefits

Insurance programs for the student's education, which includes
Social Security educational benefits

* Estimated amount the student would receive, whether or not the
student actually receives it

** These are not regarded as a resource in the need equation for
the program for which the need is being determined. In other
words, if the aid administrator is determining the need for a
Stafford loan, the amount of Stafford loan to be awarded is not a
resource.

SCHOOL & PRIVATE AID

School and other scholarship and grant aid, including:
- athletic and ROTC scholarships
- ROTC subsistence allowance
- fellowships and assistantships
- waiver of tuition and fees

Net earnings from need-based employment

School loans (long-term)***

Loans from state and other loan programs***

*** Unless these amounts were used to finance the family
contribution. See text for an explanation.

The unsubsidized Stafford, PLUS, Direct Unsubsidized, Direct
PLUS, and state and private education loans are not considered to be
resources or estimated financial assistance to the extent that they
finance (or replace) the EFC. Thus, students may borrow under these
programs up to the amount of the EFC without affecting eligibility
for campus-based aid, a subsidized Stafford Loan, or Direct
Subsidized Loan. For instance, in the campus-based example just
shown, the student could receive a $1,500 private education loan,
unsubsidized Stafford Loan, or Direct Unsubsidized Loan without
being overawarded. None of these loans would be considered a
resource as long as it did not exceed the EFC.

The school may certify an application for a subsidized Stafford Loan
or Direct Subsidized Loan only for the amount of need that remains
after subtracting both the student's EFC and estimated financial
assistance from his or her COA. As noted previously, the student can
also borrow unsubsidized loans beyond his or her need as long as the
loan does not exceed the EFC. Note that a student may qualify for a
combination of subsidized and unsubsidized loans.

[[Dependent student]]
For a dependent student, the student can borrow a combination of
subsidized and unsubsidized loans up to the applicable Stafford or
Direct Loan limit. The limit for a student depends on the student's
grade level and program length. The unsubsidized amount the
student can borrow is equal to this limit minus the subsidized amount
the student borrows. For example, if a dependent student whose loan
limit is $2,625 qualifies for a $1,600 subsidized Stafford Loan or
Direct Subsidized Loan, he or she may borrow an additional $1,025
($2,625 minus $1,600) unsubsidized Stafford Loan or Direct
Unsubsidized Loan, as long as the total of all aid received does not
exceed the student's COA.

[[Independent student]]
The independent student can also borrow the base amount described
above. The mix of subsidized and unsubsidized loans in this base
amount depends upon the student's need. The independent student
can also borrow an additional UNSUBSIDIZED loan amount, above
the base amount. The maximum additional amount is limited to
either the total of the student's EFC and remaining need or the
applicable additional unsubsidized loan limit, whichever is less. Note
that, as for the base amount, there are different loan limits depending
on the student's grad level and program length. See Chapters 10 and
11 for a list of all the applicable limits.

A dependent student whose parents are unable to obtain a PLUS or
Direct PLUS is also eligible for the additional unsubsidized loan
amount that independent students can receive. See Chapters 10 and
11 for more information.

Remember that before the school may certify a Stafford Loan or
originate a Direct Loan, the school must have determined the
student's eligibility for a Federal Pell Grant. A school does not need
to have an official EFC from the CPS to determine the Pell
eligibility. Instead, a determination of the student's Pell eligibility
could be made through software available at the school. On the other
hand, the school MUST have evidence proving that the student's data
went through the CPS before the loan may be disbursed.

[[The "Stafford Example 1" graphic on page 2-64 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

Suppose an independent student's cost of attendance (COA) is
$8,000, EFC is 1500, Pell Grant is $850, veterans benefits is $3,150,
and FSEOG is $1,000. The student is eligible for a maximum
subsidized Stafford Loan of $1,500. This amount is calculated by
subtracting the EFC and the other aid received from the COA
($8,000 -$1,500 -$5,000). Because unsubsidized Stafford Loans are
not considered a resource as long as the loan amount does not exceed
the EFC, the student would also be eligible for an additional $1,500--
the amount equal to the EFC--from this program. In the case of a
first-year dependent student, the maximum Stafford Loan that may
be borrowed is $2,625. Therefore, a first-year dependent student
whose circumstances are the same as our independent student could
borrow a $1,125 unsubsidized Stafford Loan, and the parent could
borrow the remaining $375 as a PLUS Loan. Or, the parent could
borrow the full $1,500 as a PLUS Loan and the student could borrow
just a $1,500 subsidized Stafford.

[[The "Stafford Example 2" graphic on page 2-64 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

An independent first-year undergraduate student has a cost of
attendance of $6,500, an EFC of 950, a Pell Grant of $1,350, and an
FSEOG of $2,000. This student has remaining need for subsidized
Stafford of $2,200 ($6,500 - $4,300). Because the amount of the
unsubsidized loan, up to the amount of the EFC, is not considered a
resource, the student may also borrow a $950 unsubsidized Stafford
Loan. This would mean that the student's total Stafford loan is
$3,150 ($2,200 in subsidized and $950 in unsubsidized loans).

[[The "Stafford Example 3" graphic on page 2-65 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

Suppose this student's COA is $8,500 and she has remaining need for
a subsidized loan of $4,200. Because the maximum subsidized
Stafford Loan for first-year undergraduate students is $2,625, the
student would be limited to borrowing that amount under the
subsidized program. After borrowing the $2,625, the student still has
remaining need for $1,575, AS WELL AS THE ABILITY TO
BORROW $950 (the EFC amount). Therefore, the student may
borrow a $2,525 unsubsidized Stafford Loan, which increases the
total borrowed to $5,150 ($2,625 in subsidized plus $2,525 in
unsubsidized loans).

PACKAGING AID

Packaging is the process of finding the best combination of aid to
meet a student's financial need, given limited resources and given
institutional constraints that vary from school to school. A student
may be able to receive some federal student aid--in the form of a
Federal Pell Grant--even if his or her school does not, for example,
participate in the campus-based programs and does not have its own
sources of aid. Any subsidized loan under the FFEL Program or the
Direct Loan Program is limited to whichever amount is less: 1) the
amount of the student's remaining financial need after his or her
estimated financial assistance is taken into account or 2) the loan
limit for the student's level and enrollment status. Of course, as
explained earlier, the student may also borrow an unsubsidized
Stafford, Direct Unsubsidized Loan, PLUS, Direct PLUS, state-
sponsored, or private education loan equal to the amount of the EFC.
If a school does have other sources of aid, the financial aid
administrator must decide how to allocate scarce funds from
different sources to meet students' needs.

[[Variables to consider when packaging aid]]
The financial aid administrator must evaluate numerous variables
when packaging aid and may consider questions such as these:
Should priority be given to students who apply for aid first (on a
"first-come-first-served" basis)? Should grant assistance be awarded
to beginning students and should loans and work-study go to
students who have had a chance to adapt to the academic program? If
there are not enough funds to meet every student's need, should
school policy be to give more assistance to the neediest students? Or
should the school meet an equal proportion of each student's need
across the board?

[[Special considerations]]
Special considerations in packaging also arise when a student
qualifies for both SFA funds and for vocational rehabilitation
assistance funds. In that case, the school should determine the
student's package exclusive of both the costs related to the student's
disability and anticipated vocational rehabilitation assistance. In this
way, the student with disabilities will be offered the same aid
package as a student who is in the same financial situation but who
does not have disabilities; the student with disabilities will also
receive the maximum amount of vocational rehabilitation aid to
which he or she is entitled.

If, in packaging aid, the school were to consider both the disability-
related costs and an anticipated vocational rehabilitation aid amount
that was less than those costs, the amount of SFA funds in the
student's package might be increased to cover the remaining costs.
When the vocational rehabilitation agency actually disburses funds,
it will take that SFA increase into consideration and disburse only the
smaller anticipated amount rather than disbursing enough to cover all
of the disability-related costs. The school has covered all of the
student's need in both cases: But if the increase in SFA funds in the
second case is the result of an increased loan amount, the school has
unnecessarily added to the student's debt burden. Although the
vocational rehabilitation funds should not be considered a resource
when the school packages, the school must coordinate funds
available from the vocational rehabilitation agency and from
institutional, state, and federal student financial assistance programs
to prevent an overaward. The amount of assistance from the
vocational rehabilitation agency must be documented in the student's
file.

Each state association of student financial aid administrators has a
voluntary agreement with its state vocational rehabilitation agency;
this agreement specifies the procedures for coordinating vocational
rehabilitation assistance with other forms of financial aid. For
information about your state association's agreement, contact that
association or a regional office of the U.S. Department of Education.

[[Makeup of student body may influence packaging policy]]
The characteristics of a school's academic programs and the makeup
of its student body may influence its packaging procedures. Section 9
of the Self-Instructional Modules (formerly produced through
contract by the SFA Programs) discusses some of the basic types and
philosophies of packaging. Although the modules have not been
updated, financial aid administrators may nonetheless find the
general discussion of packaging useful. For ideas on different
approaches to packaging, also refer to materials prepared by
professional associations representing schools and financial aid
administrators or consult with other aid administrators at schools that
have similar characteristics.

OVERAWARDS

While the school must always take care not to overaward the student
when packaging aid, circumstances may change after the aid has
been awarded and may result in an overaward. For instance, the
student may receive an academic scholarship, or the student may
want to extend his or her work-study employment. When these
circumstances would lead to an overaward, the school may be
required to adjust the federal student aid in the package.

[[Pell]]
Pell Grants are never adjusted to take into account other forms of aid.

[[FFEL and Direct]]
If a school determines before FFEL or Direct Loan funds (other than
PLUS) are delivered to the student that the student will receive an
overaward, the school must take certain steps to eliminate the
overaward. In general, there is no overaward tolerance for these
loans. However, if a student's financial aid package also contains
Federal Work-Study (FWS), there is a $300 overaward tolerance for
the loan overaward. The school in this case would not have to adjust
a Stafford or Direct Loan unless the overaward exceeds $300.

- If the package includes a unsubsidized Stafford Loan, Direct
Unsubsidized Loan, Direct PLUS Loan, PLUS Loan, or
nonfederal loan and the aid package does not already apply these
loans to finance the EFC, the aid package may be adjusted so that
all or some portion of these loans replaces the EFC, thus reducing
or eliminating the overaward.

- The second or subsequent disbursement of a Stafford or Direct
Loan can be canceled or reduced.

- If these adjustments have been made and an overaward still exists
for a Stafford Loan or Direct Loan borrower, the school must
withhold and promptly return to the lender or the federal
government any funds that have not yet been delivered to the
borrower. Note that Stafford and Direct Loan overawards must be
repaid before adjusting or canceling campus-based funds.

- For a Stafford Loan, the school may return the entire
undelivered amount or may choose to return only the amount of
aid for which the student becomes ineligible. For example, if a
loan disbursement is $1,000 and the amount of the overaward is
$800, the school could return just the $800 or could instead the
entire check and have the lender issue a new check for $200. In
either case, the school must provide the lender with a written
statement describing why the funds were returned.

- For a Direct Loan borrower, the school may choose either to
return the amount of loan for which the student becomes
ineligible or to cancel the loan, return the full disbursement, and
originate a new loan for the lower amount. Consider the
Stafford example (with a $1,000 disbursement and an
overaward of $800) and apply it to a Direct Loan school. The
school could return just the $800 or return the full
disbursement, cancel the loan, and originate a new loan for
$200. If the school chooses the latter, a new origination record
must be created, and a new promissory note must be generated
for the student to sign.

- The requirement to return overawards does not apply to Stafford
Loans made to cover the COA at foreign schools or to PLUS or
Direct PLUS Loans.

- Although a school is not required to return Stafford Loan or Direct
Loan funds that were delivered to the borrower (either directly or
by applying them to the student account) before the overaward \
situation occurred, the law does not prevent the school from
returning funds that were applied to the student account if the
school chooses to do so. The borrower who received funds
disbursed directly to him or her is not required to repay funds that
were delivered in excess of need unless the overaward was caused
by his or her misreporting or withholding of information.

[[Campus-based]]
If reducing undisbursed Stafford Loans or Direct Loans is not
sufficient to eliminate the overaward, the school may be required to
reduce the amount of campus-based aid that has been awarded the
student. Campus-based aid need not be reduced if the overaward
does not exceed $300, which is the overaward threshold for all
campus-based programs. Note that the $300 threshold is allowed
only if an overaward occurs after campus-based aid has been
packaged. The threshold does not allow a school to deliberately
award campus-based aid that, in combination with other resources,
exceeds the student's financial need. (See Chapter 5, Section 2.)

If the overaward cannot be eliminated by reducing future payments
of campus-based aid, the student must repay the full amount of the
campus-based funds that he or she received in excess of need.
However, the student cannot be required to repay FWS wages he or
she has earned.

*1* A legal dependent is any person who 1) lives with the student at
the time the application is filed, 2) receives more than half of his or
her support from the student at the time of filing, and 3) will
continue to receive that support between July 1, 1997 and June 30,
1998. An otherwise dependent student would--if she or he had a
legal dependent as defined above--be considered an independent
student, regardless of the nature of the relationship between the
student and the dependent. Note that the legal dependent would also
be included when reporting "Household Size" and "Number in
College" (if applicable) on the FAFSA.

*2* A student is considered disabled if he or she is deaf, mentally
retarded, hard of hearing, speech or language impaired, visually
disabled, seriously emotionally disturbed, orthopedically impaired,
autistic, has a traumatic brain injury, is otherwise health-impaired, or
has specific learning disabilities that require special education and
related services. There is no maximum on the allowance for expenses
related to a disability. However, the school should be careful not to
include costs for services or equipment provided free of charge by
other assisting agencies.

*3* Note that although a Pell Grant 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: 03/29/2000