Maintained for Historical Purposes

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

Accounting Procedures for Title IV Programs

PublicationDate: 7/1/95
ChapterNumber: 5
ChapterTitle: Accounting Procedures for Title IV Programs
SectionNumber: 3
SectionTitle: Accounting
PageNumbers: 146-192


A school's financial accounting system must meet both internal and
external information needs. The organizational structure of the
accounting system should be designed to accommodate these needs.

5.3.1 Fund Accounting

Fund accounting is the method of segregating assets into categories
according to restrictions placed on their use by a funding source.
Institutions need to consider their fund accounting needs, particularly
with respect to restricted funds or funds that are initially restricted,
when designing a chart of accounts. The chart of accounts should
accurately reflect the school's current organization and programs, and
it should have the flexibility to accommodate any future change in
the organization.

Appendix F, page F-4, provides more details on changes occurring in
fund accounting for postsecondary institutions.

5.3.1.1 Chart of Accounts

((Basic ledger accounts))
As an aid in discussing records and accounting techniques for
financial aid programs, the following summary chart of accounts lists
accounts considered necessary for institutions to account properly for
Title IV program funds. Whether these accounts are set up in a
manual or an automated accounting system does not matter. Either
system will need the basic suggested ledger accounts to meet ED's
minimum program and fiscal requirements as well as the institution's
external reporting requirements, such as basic financial statements
and fund statements. Such a system will serve to meet the
accounting needs of the institution, ED, and other federal agencies.
Additional accounts may be added as deemed necessary by the
institution. These accounts should be reviewed at least annually to
determine if additions or deletions are necessary to meet changes in
federal regulations.

((Account numbering method))
The chart of accounts is a primary internal control mechanism
delineating the framework of the accounts. This chart has two
components: (1) an account number (which usually follows a
standard account-code structure) and (2) a definition, by name, of the
account code. A uniform numbering scheme is used here to assist in
identifying the parts of the balance sheet on which ledger accounts
are located. The numbers assigned to these ledger accounts are
arbitrarily assigned, but in sequential order, and these specific
numbers are not required to put these ledgers in place in institutional
accounting systems.

In all cases, the first digit of an account number identifies an element
of the balance sheet, as follows:

1 - Asset Account

2 - Asset Reduction Account

3 - Liability Account

4 - Capital Account (OR Program Balance)

5 - Capital Reduction Account

6 - Income Account (Revenue)

7 - Expense Account

((Self-balancing accounts))
Each federal student financial aid program contains some or all of
the elements of the balance sheet outlined here. Each will be self
balancing and will be separated completely from other programs and
from the general operating fund of the institution. Within each
program, the sum of ledger accounts with debit balances equals the
sum of ledger accounts with credit balances.

((Award authorizations))
In the following Summary Chart of Accounts, award authorizations
are not shown. It is recommended that they be booked as a memo
journal entry or budget item. Then, as award authorizations are
adjusted, appropriate adjustments to budget figures would be
entered. This process helps ensure that drawdown amounts do not
exceed authorization levels.

NOTE: In the ED/PMS accounts shown in the Summary Chart of
Accounts, account # 1-2 (Accounts Receivable, ED/PMS) is used
only if an institution does not use the reimbursement payment
method for drawing down Title IV funds (34 CFR 668.163[a][3],
Federal Register, Vol. 59, No. 230, Thursday, December 1, 1994).
The accounting for the reimbursement method will not be covered
here. However, it should be booked as any other account receivable.
Each respective subsidiary ledger would also book the receivable.


Summary Chart Of Accounts

ED/PMS Accounts (Title IV Funds Only, Not Including Federal
Direct Loans)

To facilitate the calculations of excess cash and interest earnings on
Title IV aid funds (Federal Pell Grant, FSEOG, FWS, and Federal
Perkins Programs) and, in accordance with the Cash Management
regulations issued on December 1, 1994, separate ED/PMS accounts
should be established for Title IV aid funds and for non-Title-IV aid
funds. In addition, because the Federal Direct Loan program is not
reported on ED/PMS 272 reports (neither quarterly or monthly) and
uses a separate ED/PMS account number, its funds would not be
included in either of these separate accounts.

1 - Asset Accounts
1 - 1 Cash Control, ED/PMS
1 - 2 Accounts Receivable, ED/PMS

3 - Liability Accounts - None

4 - Capital Accounts - None

6 - Income Accounts - None*19*

7 - Expense Accounts - None*19*

National Finance Center (NFC) Accounts

NFC accounts are needed to reflect amounts of Title IV program
funds disallowed after the program authorization account has been
closed (removed from ED/PMS).

1 - Asset Accounts
1 - 1 Cash Unremitted to NFC
1 - 2 Due from School

3 - Liability Accounts
3 - 1 Accounts Payable, NFC

4 - Capital Accounts - None

6 - Income Accounts - None

7 - Expense Accounts - None

Federal Pell Grant Accounts

1 - Asset Accounts
1 - 1 Cash, Federal Pell Grants

3 - Liability Accounts - None

4 - Capital Accounts - None

6 - Revenue Accounts
6 - 1 Transfer from ED/PMS - Federal Pell Grants for Students
6 - 2 Federal Reimbursement of Pell Grant Administrative
Cost Allowance (ACA)

7 - Expense Accounts
7 - 1 Student Grants Paid - Federal Pell Grant
7 - 2 Administrative Cost Allowance (ACA) Paid to Institution

Federal Supplemental Educational Opportunity Grant (FSEOG)
Accounts

1 - Asset Accounts
1 - 1 Cash, FSEOG

3 - Liability Accounts - None

4 - Capital Accounts - None

6 - Income Accounts
6 - 1 Transfer from ED/PMS - FSEOG
6 - 2 Institution's Cash Contribution
6 - 3 Institution's Non-cash Contribution (Memo Account)

7 - Expense Accounts
7 - 1 Student Grants Paid - FSEOG
7 - 2 Student Grants - FSEOG from Non-cash Contribution
(Memo Account)
7 - 3 Administrative Cost Allowance (ACA) Paid to Institution
(if applicable)

Federal Work-Study (FWS) Accounts

1 - Asset Accounts
1 - 1 Cash, Federal Work-Study
1 - 2 Accounts Receivable, Off-Campus Entities

3 - Liability Accounts
3 - 1 Federal Income Taxes Withheld
3 - 2 Social Security Taxes Withheld
3 - 3 State Income Taxes Withheld
3 - 4 Other Withholdings
3 - 5 Accrued Wages Payable
3 - 6 Employer's Payroll Taxes Payable

4 - Capital Accounts - None

6 - Income Accounts
6 - 1 Transfer from ED/PMS - Federal Work-Study
6 - 2 Institution's Cash Contribution
6 - 3 Institution's Non-cash Contribution (Memo Account)
6 - 4 Off-Campus Employer's Contribution, Public/Private
Nonprofit Entities
6 - 5 Off-Campus Employer's Contribution, Private For-Profit
Entities

7 - Expense Accounts
7 - 1 Student Wages - On-Campus
7 - 2 Student Wages - On-Campus, Non-cash Contribution for
Nonfederal Share (Memo Account)
7 - 3 Student Wages - Off-Campus, Public/Private Nonprofit
Entities
7 - 4 Student Wages - Off-Campus, Private For-Profit Entities
7 - 5 Regular Job Location and Development (JLD) Expenses
Paid to Institution
7 - 6 Administrative Cost Allowance (ACA) Paid to Institution

Federal Perkins Loan Accounts

1 - Asset Accounts
1 - 1 Cash, Federal Perkins Loans
1 - 2 Funds Advanced to Students*20*

2 - Asset Reduction Accounts
2 - 1 Loan Principal Collected
2 - 2 Defaulted Loan Principal - Assigned to Federal
Government
2 - 3 Loan Principal Cancelled - Teaching Service (10% Rate),
Loans Made Prior to 7/1/72
2 - 4 Loan Principal Cancelled - Teaching Service (15% Rate),
Loans Made Prior to 7/1/72
2 - 5 Loan Principal Cancelled - Military Service (12.5% Rate),
Loans Made Prior to 7/1/72
2 - 6 Loan Principal Cancelled - Teaching Service (15% Rate),
Loans Made 7/1/72 and After
2 - 7 Loan Principal Cancelled - Teaching Service (20% Rate),
Loans Made 7/1/72 and After
2 - 8 Loan Principal Cancelled - Teaching Service (30% Rate),
Loans Made 7/1/72 and After
2 - 9 Loan Principal Cancelled - Teaching Service (Field of
Expertise: Math, Science, Foreign Language, Bilingual
Education) (15% Rate), Loans Made 7/23/92 and After
2 - 10 Loan Principal Cancelled - Teaching Service (Field of
Expertise: Math, Science, Foreign Language, Bilingual
Education) (20% Rate), Loans Made 7/23/92 and After
2 - 11 Loan Principal Cancelled - Teaching Service (Field of
Expertise: Math, Science, Foreign Language, Bilingual
Education) (30% Rate), Loans Made 7/23/92 and After
2 - 12 Loan Principal Cancelled - Military Service
(12.5% Rate), Loans Made 7/1/72 and After
2 - 13 Loan Principal Cancelled - Death
2 - 14 Loan Principal Cancelled - Disability
2 - 15 Loan Principal Cancelled - Bankruptcy
2 - 16 Loan Principal Cancelled - Peace Corps or VISTA
(15% Rate)
2 - 17 Loan Principal Cancelled - Peace Corps or VISTA
(20% Rate)
2 - 18 Loan Principal Cancelled - Head Start (15% Rate)
2 - 19 Loan Principal Cancelled - Volunteer Service
(15% Rate)
2 - 20 Loan Principal Cancelled - Volunteer Service
(20% Rate)
2 - 21 Loan Principal Cancelled - Law Enforcement and
Corrections Officer Service (15% Rate)
2 - 22 Loan Principal Cancelled - Law Enforcement and
Corrections Officer Service (20% Rate)
2 - 23 Loan Principal Cancelled - Nurse/Medical Technician
(15% Rate)
2 - 24 Loan Principal Cancelled - Nurse/Medical Technician
(20% Rate)
2 - 25 Loan Principal Cancelled - Nurse/Medical Technician
(30% Rate)
2 - 26 Loan Principal Cancelled - Child/Family and Early
Intervention Service (15% Rate)
2 - 27 Loan Principal Cancelled - Child/Family and Early
Intervention Service (20% Rate)
2 - 28 Loan Principal Cancelled - Child/Family and Early
Intervention Service (30% Rate)
2 - 29 Loan Principal Adjustments - Other

3 - Liability Accounts - None

4 - Capital Accounts
4 - 1 Federal Fund Balance
4 - 2 Institutional Fund Balance

6 - Income Accounts
6 - 1 Funds Transferred from ED/PMS - Perkins - FCC
6 - 2 Funds Transferred from Institution - Perkins - ICC
6 - 3 Interest Earned on Loans
6 - 4 Other Earnings - Late Charges on Loans Made
7/1/87 and After
6 - 5 Other Earnings - Miscellaneous
6 - 6 Reimbursement of Amounts Cancelled on Loans Made
7/1/72 and After
6 - 7 Repayments to Federal Government
6 - 8 Repayments to Institution

7 - Expense Accounts
7 - 1 Litigation Expenses
7 - 2 Administrative Cost Allowance (ACA) Paid to Institution
7 - 3 Other Collection Expenses
7 - 4 Cost of Loan Principal and Interest Cancelled - Teaching
Service, Loans Made Prior to 7/1/72
7 - 5 Cost of Loan Principal and Interest Cancelled - Teaching
Service, Loans Made 7/1/72 and After
7 - 6 Cost of Loan Principal and Interest Cancelled - Military
Service, Loans Made Prior to 7/1/72
7 - 7 Cost of Loan Principal and Interest Cancelled - Teaching
Service (Field of Expertise: Math, Science, Foreign
Language, Bilingual Education), Loans Made 7/23/92
and After
7 - 8 Cost of Loan Principal and Interest Cancelled - Military
Service, Loans Made 7/1/72 and After
7 - 9 Cost of Loan Principal and Interest Cancelled - Death
7 - 10 Cost of Loan Principal and Interest Cancelled -
Disability
7 - 11 Cost of Loan Principal and Interest Cancelled -
Bankruptcy
7 - 12 Cost of Loan Principal and Interest Cancelled - Peace
Corps or VISTA
7 - 13 Cost of Loan Principal and Interest Cancelled - Head
Start
7 - 14 Cost of Loan Principal and Interest Cancelled -
Volunteer Service
7 - 15 Cost of Loan Principal and Interest Cancelled - Law
Enforcement and Corrections Officer Service
7 - 16 Cost of Loan Principal and Interest Cancelled -
Nurse/Medical Technician
7 - 17 Cost of Loan Principal and Interest Cancelled -
Child/Family and Early Intervention Service
7 - 18 Cost of Defaulted Loan Principal and Interest Assigned
to Federal Government
7 - 19 Other Costs or Losses

William D. Ford Federal Direct Loan (Direct Loans) Accounts

1 - Asset Accounts
1 - 1 Cash, Federal Direct Loans
1 - 2 Accounts Receivable, ED/PMS

3 - Liability Accounts - None

4 - Capital Accounts - None

6 - Income Accounts
6 - 1 Income from ED/PMS - Federal Direct Loans
6 - 2 Federal Reimbursement of Direct Loan Origination
Services Costs

7 - Expense Accounts
7 - 1 Funds Advanced to Borrowers
7 - 2 Payment for Origination Services (POS)*21* (Paid to
Institution)

Electronic Funds Transfer (EFT) of Federal Family Education Loan
(FFEL) Funds from Lenders to the Institution

1 - Asset Accounts
1 - 1 Cash, FFEL Account
1 - 2 Cash Returned to Lenders
1 - 3 Cash Disbursed to Borrowers
1 - 4 Cash, Interest Earnings

3 - Liability Accounts
3 - 1 FFEL Trust Account

4 - Capital Accounts - None

6 - Income Accounts
6 - 1 Interest Earnings from Investment of FFEL Funds

7 - Expense Accounts - None

5.3.1.2 ED/PMS Title IV Account

1 - 1 CASH CONTROL, ED/PMS: This account may be a debit or
credit balance account depending on the timing of drawdowns and
disbursements. It is established to identify the balance of federal
cash disbursed to a school through ED/PMS. The system described
here segregates federal cash by using separate accounts for ED/PMS-
Title-IV-funded programs. These separate ED/PMS accounts reflect
only ED/PMS-funded programs and allow reconciliation by
combining with the non-Title-IV ED/PMS accounts to the "cash on
hand" section of the ED/PMS 272 Report. Separate checking
accounts need not be maintained for each program as long as school
records indicate precisely where cash was used. (See section 4.5.1.)

Debit this account for:

- All cash received from ED/PMS for all Title IV programs, but not
including Federal Direct Loans, Payment for Origination Services,
Pell Grants, ACA reimbursement, or Perkins Loan cancellation
reimbursements (contra account # 1-2).

- All unexpended cash on programs when accountability has been
transferred to NFC (contra account # 1-2).

Credit this account with:

- All cash transferred to programs.

- Excess cash billings paid to National Finance Center (NFC)
(contra account # 1-2).

1 - 2 ACCOUNTS RECEIVABLE, ED/PMS: This account can be a
debit or credit balance account depending on the timing of
disbursements and drawdowns. It represents all amounts due from
all open-status ED/PMS-funded programs.*22* The debit balance
may exist between the time funds are requested from ED/PMS and
the time they are received.

Debit this account for:

- Amount of awards disbursed to students and recorded as income
transferred from ED/PMS in each respective Title IV program
account.

Credit this account for:

- Cash received from ED/PMS (contra account # 1-1).

- Any unexpended program balances after accountability has been
transferred to NFC (contra account # 1-1).

5.3.1.3 National Finance Center (NFC) Account

1 - 1 CASH UNREMITTED TO NFC: This account is used to
reflect that a portion of cash is no longer under ED/PMS
accountability; the accountability has been transferred to the National
Finance Center (NFC).

This cash is segregated when a grant's final closing amount is in
dispute. Accounting for the funds here reflects a transfer of
accountability from ED/PMS. If more than one program is in
dispute, separate subsidiary accounts should be set up for each
program. Disallowed expenditures on open, current-year ED/PMS
accounts are recorded by reclassifying those expenditures from the
specific program account to institutional accounts and then
reinstating that same amount from the Title IV program account to
the ED/PMS account.

Debit this account for:

- Cash received from the institution for disallowed expenditure
(contra account # 1-2).

- Interest earnings on Title IV funds that exceed the regulatory
threshold (contra account # 3-1).

Credit this account with:

- Amounts remitted to NFC (contra account # 3-1).

1 - 2 DUE FROM SCHOOL: This debit balance account reflects
amounts due from the school as a result of disallowed expenditures
on closed accounts not under ED/PMS accountability.

Debit this account for:

- Billings from NFC for expenditures disallowed by program
review or audit, excess cash, and the like (contra account # 3-1).

Credit this account for:

- Cash received from the institution (contra account # 1-1).

3 - 1 ACCOUNTS PAYABLE, NFC: This account is normally a
credit balance account that reflects any liabilities to NFC as a result
of cash accountability separated from ED/PMS as described earlier
OR disallowed expenditures on programs not under ED/PMS
accountability OR excess interest earnings returnable to ED through
NFC.

Debit this account for:

- Amounts remitted to NFC (contra account # 1-1).

Credit this account with:

- Billings from NFC (contra account # 1-2).

- Interest earnings returnable to NFC (contra account # 1-1).

5.3.1.4 Federal Pell Grant Account

1 - 1 CASH, FEDERAL PELL GRANTS: All receipts and
disbursements of cash related to the Pell Grant Program are recorded
in this account. Typically, this account would show a zero balance
after each period's entries are posted, as the transfer of funds from
ED/PMS should equal only the amount of grants to be paid
immediately to students. (See section 4.3.1.)

Debit this account for:

- Transfers from ED/PMS account (contra account # 6-1).

- Recoveries from recipients (contra account # 7-1).

Credit this account with:

- Payments to students (contra account # 7-1).

6 - 1 TRANSFER FROM ED/PMS - FEDERAL PELL GRANTS
FOR STUDENTS: This credit balance account controls the transfer
of cash from the ED/PMS account "Cash Control, ED/PMS" to the
Pell Grant account "Cash, Federal Pell Grants." Such cash transfers
should be made only in the precise amounts needed immediately to
pay grants to students. (See section 4.3.1.)

Debit this account for:

- Closing entry at end of accounting fiscal year, the total amount of
cash transferred from ED/PMS account to meet disbursement
needs for the period (contra account # 7-1).

Credit this account with:

- Cash transferred from ED/PMS account to meet current
disbursement needs (contra account # 1-1).

6 - 2 FEDERAL REIMBURSEMENT OF PELL GRANT
ADMINISTRATIVE COST ALLOWANCE (ACA): This credit
balance account is used to deposit the reimbursements received via
Electronic Funds Transfer (EFT) from ED for Pell ACA.

Debit this account for:

- Closing entry at end of accounting fiscal year for the amount of
Pell ACA reimbursements (contra account # 7-2).

Credit this account with:

- ACA payments received via EFT from ED (contra account # 1-1).

7 - 1 STUDENT GRANTS PAID - FEDERAL PELL GRANT:
This debit balance account is maintained to record payments made to
students for Pell Grants.

Debit this account for:

- Grant payments made to students (contra account # 1-1).

Credit this account with:

- Recoveries from recipients (contra account # 1-1).

- Closing entry at end of accounting fiscal year for the total amount
of grant payments made to students for the accounting period
(contra account # 6-1).

7 - 2 ADMINISTRATIVE COST ALLOWANCE (ACA) PAID TO
INSTITUTION: This debit balance account is maintained to record
payments made to the institution for administrative costs. This
amount cannot exceed the amount set by regulations.

Debit this account for:

- ACA paid to the institution (contra account # 1-1).

Credit this account with:

- Closing entry at the end of the accounting period (contra
account # 6-2).

5.3.1.5 Federal Supplemental Educational Opportunity Grant
(FSEOG) Account

1 - 1 CASH, FSEOG: All receipts and disbursements of cash related
to the Federal Supplemental Educational Opportunity Grant
(FSEOG) Program are recorded in this account. Typically, this
account shows a zero balance after each period's entries are posted,
as the transfer of funds from ED/PMS should be only for the amount
of grants to be paid to students immediately and for administrative
expenses. (See section 4.3.1.)

Debit this account for:

- Transfers from ED/PMS account (contra account # 6-1).

- Cash contributions of the institution (contra account # 6-2).

Credit this account with:

- Payments to students (contra account # 7-1).

- Payments to institution for administrative cost allowance (contra
account # 7-3).

6 - 1 TRANSFER FROM ED/PMS - FSEOG: This revenue account
is maintained to control the transfer of cash from the ED/PMS
account "Cash Control, ED/PMS" to the FSEOG account "Cash,
FSEOG." Such transfers of cash should be made only in the precise
amounts needed to pay awards and administrative cost allowance (if
applicable) on a current basis.

Debit this account for:

- Closing entry at end of accounting fiscal year (contra
accounts # 7-1, 7-3).

Credit this account with:

- Amounts of cash transferred from the ED/PMS account to meet
the federal share of current FSEOG grants (contra account # 1-1).

6 - 2 INSTITUTION'S CASH CONTRIBUTION: This credit
balance account is maintained to record cash contributions made by
the institution to provide (together with any non-cash contribution)
the nonfederal share of FSEOG grants.

Debit this account for:

- Closing entry at end of accounting fiscal year (contra
account # 7-1).

Credit this account with:

- Amounts of cash provided by the institution to pay its share of
current FSEOG grants (contra account # 1-1).

6 - 3 INSTITUTION'S NON-CASH CONTRIBUTION (MEMO
ACCOUNT): This credit balance account is maintained to record
non-cash contributions made by the institution to provide (together
with any cash contribution) the required nonfederal share of FSEOG
grants.

Debit this account for:

- Closing entry, the cash value of all tuition rebates or similar
credits to student accounts as the nonfederal share of FSEOG
awards at end of accounting fiscal year (contra account # 7-2).

Credit this account with:

- Non-cash contributions provided from institutional resources to
pay the nonfederal share of current FSEOG grants, including
payments made directly to students from institutional funds
(contra account # 7-2).

7 - 1 STUDENT GRANTS PAID - FSEOG: This expense account
is maintained to help prepare required FSEOG program reports. If
the institution transfers cash to provide the required percent of the
federal share, then this account would record both the federal and
nonfederal shares of FSEOG grants. The debit balance in this
account combined with account # 7-2, before closing, should agree
with the sum of the individual award amounts shown in student
records as FSEOG grants for the current year. (Student master
records are discussed in section 2.8.9.)

Debit this account for:

- Payments to students for FSEOG grants (contra account # 1-1).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
account # 6-1).

7 - 2 STUDENT GRANTS - FSEOG FROM NON-CASH
CONTRIBUTIONS (MEMO ACCOUNT): This expense account is
used if the institution makes non-cash contributions and pays
students a portion of their FSEOG grants directly from institutional
resources.

Debit this account for:

- Payments to students for FSEOG grants from institutional
resources (contra account # 6-3).

Credit this account for:

- Closing entry at end of accounting fiscal year (contra
account # 6-3).

7 - 3 ADMINISTRATIVE COST ALLOWANCE (ACA) PAID TO
INSTITUTION (IF APPLICABLE): This expense account is used to
record administrative cost allowance as it is paid to the institution.
Such payments are limited by regulations and may not be made from
FSEOG funds unless students received FSEOG funds during the
period. (See section 3.3.)

Debit this account for:

- Payments to institution for administrative expenses (contra
account # 1-1).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
account # 6-1).

5.3.1.6 Federal Work-Study (FWS) Account

1 - 1 CASH, FEDERAL WORK-STUDY: All receipts and
disbursements of cash related to the Federal Work-Study (FWS)
Program are recorded in this account. Any debit balance remaining
after payroll payment should consist solely of institutional and/or
off-campus employer funds, as federal funds should be transferred
from the ED/PMS Cash Control Account (ED/PMS account # 1-1)
only in the precise amount needed for the federal share of current
disbursements. (See section 4.3.1.)

Debit this account for:

- Federal contributions transferred from ED/PMS account (contra
account # 6-1).

- Cash contributions of the institution (contra account # 6-2).

- Cash payments of off-campus employers (contra account # 1-2).

- Cash paid into fund by the institution for later payment of
employer's share of payroll taxes (contra account # 3-6).

- Cash contributions paid by the institution for off-campus
employers that have not paid their nonfederal share (contra
account # 1-2).

Credit this account with:

- Federal share of on-campus compensation and federal and
nonfederal shares of off-campus compensation to students (contra
accounts # 3-5, 7-3, 7-4).

- Administrative expenses paid to the institution (contra
account # 7-6).

- Refund of contribution to the institution (contra account # 6-2).

- Refund of contribution to off-campus employers (contra
account # 1-2).

- Payment for compensation withheld (contra
accounts # 3-1, 3-2, 3-3, 3-4).

- Payment of employer's payroll taxes (contra account # 3-6).

- Job Location and Development Program expenses paid to the
institution (contra account # 7-5).

1 - 2 ACCOUNTS RECEIVABLE, OFF-CAMPUS ENTITIES:
This account is used to record the amounts due from off-campus
employers for the nonfederal share of student wages. Separate
subsidiary accounts should be set up for each off-campus entity.

Debit this account for:

- Amounts to be provided by the off-campus employers to pay the
required percent of the nonfederal share of wages of students
employed off campus (contra accounts # 6-4, 6-5).

- Refunds to off-campus employers of excess cash contributions
(contra account # 1-1).

Credit this account for:

- Cash paid by off-campus employers (contra account # 1-1).

- Cash paid by institution for off-campus employers that have not
paid their nonfederal share (contra account # 1-1).

3 - 1 FEDERAL INCOME TAXES WITHHELD

3 - 2 SOCIAL SECURITY TAXES WITHHELD*23*

3 - 3 STATE INCOME TAXES WITHHELD

3 - 4 OTHER WITHHOLDINGS

These accounts are used to record the tax amounts withheld from the
pay of students employed under the Federal Work-Study Program, if
withholding is necessary.

Debit these accounts for:

- Taxes paid to the appropriate agency for federal income taxes,
Social Security taxes (when applicable), state income taxes, and
other taxes (contra account # 1-1).

Credit these accounts with:

- Amounts withheld from students' pay for payment of federal
income taxes, Social Security taxes (when applicable), state
income taxes, and other taxes (contra accounts # 7-1, 7-3, 7-4).

3 - 5 ACCRUED WAGES PAYABLE: This account is used to
accumulate student wages earned but not paid at the end of a report
period. This is necessary because the Federal Work-Study portion of
the FlSAP report requires compensation earned during the reporting
period to be reported, regardless of when it is paid. The drawdown
of cash from the ED/PMS Cash Control Account is on a cash basis,
and funds are not drawn down until accrued wages have actually
been disbursed (paid).

Debit this account for:

- Amounts of gross compensation earned in the previous reporting
period and paid during the current period (contra account # 1-1).

Credit this account with:

- Gross compensation earned, but not yet paid at the end of the
reporting period (contra accounts # 7-1, 7-2, 7-3, 7-4).

3 - 6 EMPLOYER'S PAYROLL TAXES PAYABLE: This credit
balance account is maintained to record the amount of payments due
to be made by the institution for the employer's share of payroll taxes
on accounts of students employed under the Federal Work-Study
Program. Federal Work-Study funds may not be used to pay any
portion of such taxes. In some systems, the employer's share of
payroll taxes is handled directly from the general fund, and off-
campus employers' payments for their share of payroll taxes are
reimbursed to the general fund rather than transferring the amount
into the FWS fund. In this case, account # 3-6 would not be needed
in the FWS set of accounts.

Debit this account for:

- Amounts of payroll taxes paid (contra account # 1-1).

Credit this account with:
*24*
- Amounts of payroll taxes payable from cash amounts transferred
by the institution or off-campus employers for payment of their
share of payroll taxes (contra account # 1-1).

6 - 1 TRANSFER FROM ED/PMS - FEDERAL WORK-STUDY:
This credit balance account controls the transfer of cash from the
ED/PMS account, "Cash Control, ED/PMS" to the FWS account,
"Cash, Federal Work-Study." Such transfers of cash should be made
only in the precise amounts needed for the federal share of current
payroll, plus administrative expenses and Job Location and
Development Program expenses. No transfer of cash should occur
until the federal share of the currently payable payroll has been
calculated. (See section 4.3.1.)

Debit this account for:

- The federal share of wages earned (contra
accounts # 7-1, 7-3, 7-4).

- Administrative expenses paid to the institution (contra
account # 7-6).

- Job Location and Development Program expenses paid to the
institution (contra account # 7-5).

Credit this account with:

- Amounts of cash transferred from the ED/PMS account "Cash
Control, ED/PMS" to meet current disbursement needs (contra
account # 1-1).

6 - 2 INSTITUTION'S CASH CONTRIBUTION: This credit
balance account is used only if the institution transfers cash to
provide the required percent of the nonfederal share of student wages
on campus, then pays both the federal share and nonfederal shares of
campus wages from these accounts.

Debit this account for:

- Refund to the institution of excess cash advances (contra
account # 1-1).

- Closing entry, the nonfederal share (that is, the share for which
Federal Work-Study funds are not available) of cash wages paid to
students employed on campus (contra account # 7-1).

Credit this account with:

- Amounts of cash provided by the institution to pay its share of on-
campus student wages (contra account # 1-1).

6 - 3 INSTITUTION'S NON-CASH CONTRIBUTION (MEMO
ACCOUNT): This credit balance account records the amount of
wages "paid" to students by the institution through tuition rebates
and other such non-cash means, as well as amounts paid directly to
students from institutional funds.

Debit this account for:

- Closing entry, the cash value of all tuition rebates or similar
credits to student accounts made by the institution during the
reporting period as its share of on-campus student wages (contra
account # 7-2).

Credit this account with:

- Each pay period, the cash value of all tuition rebates or similar
credits to student accounts and amounts paid to students directly
by the institution as its share of on-campus student wages (contra
account # 7-2).

6 - 4 OFF-CAMPUS EMPLOYER'S CONTRIBUTION,
PUBLIC/PRIVATE NONPROFIT ENTITIES

6 - 5 OFF-CAMPUS EMPLOYER'S CONTRIBUTION, PRIVATE
FOR-PROFIT ENTITIES

These credit balance accounts are maintained to record contributions
due from off-campus employers to provide the required percent (or
greater) of the nonfederal share of student wages earned off campus.

Debit these accounts for:

- Closing entry, nonfederal share (that is, the share for which
Federal Work-Study funds are not available) of wages paid to
students employed off campus (contra accounts # 7-3, 7-4).

Credit these accounts with:

- Amounts to be provided by off-campus employers to pay the
required percent of the nonfederal share of wages of students
employed off campus (contra account # 1-2).

7 - 1 STUDENT WAGES - ON-CAMPUS: This expense account is
maintained to record the federal share of Federal Work-Study wages.
If the institution transfers cash to provide the required percent of the
federal share, then this account would record both the federal and
nonfederal shares of wages. This account may be further subdivided
into categories such as instruction, research, public service, and so
on, to facilitate nonfederal functional reporting.

Debit this account for:

- The federal share of wages earned by students in on-campus
employment from the first day to the last day of the reporting
period (posted from payroll vouchers, adjusted as necessary for
accruals) (contra accounts # 1-1, 3-1, 3-2, 3-3, 3-4, 3-5).

Credit this account with:

- As a closing entry, the federal share of wages earned on campus
(contra account # 6-1).

7 - 2 STUDENT WAGES - ON-CAMPUS, NON-CASH
CONTRIBUTION FOR NONFEDERAL SHARE (MEMO
ACCOUNT): This expense account is maintained to record the
nonfederal share of student wages paid from the institution's funds or
through tuition rebates or similar credits.

Debit this account for:

- The nonfederal share of wages earned by students in on-campus
employment and paid directly from the institution's funds (contra
account # 6-3).

- The nonfederal share of wages "paid" to students through tuition
rebates and other non-cash means (contra account # 6-3).

Credit this account for:

- As a closing entry, the nonfederal share of wages earned on
campus (contra account # 6-3).

7 - 3 STUDENT WAGES - OFF-CAMPUS, PUBLIC/PRIVATE
NONPROFIT ENTITIES

7 - 4 STUDENT WAGES - OFF-CAMPUS, PRIVATE FOR-
PROFIT ENTITIES

These expense accounts are maintained to help prepare required
Federal Work-Study Program reports.

Debit these accounts for:

- Gross amount of wages earned by students in off-campus
employment from the first day to the last day of the reporting
period (posted from payroll vouchers, adjusted as necessary for
accruals) (contra accounts # 3-1, 3-2, 3-3, 3-4, 3-5).

Credit these accounts with:

- Closing entry for the nonfederal share of wages earned off campus
(contra accounts # 6-4, 6-5).

- The federal share of wages earned off campus (contra
account # 6-1).

7 - 5 REGULAR JOB LOCATION AND DEVELOPMENT (JLD)
EXPENSES PAID TO INSTITUTION: This expense account is
maintained to record payments made to the institution for Job
Location and Development Program expenses. This amount cannot
exceed the lesser of $50,000 or 10 percent of the institution's Federal
Work-Study (FWS) authorization for the award year to locate and
develop off-campus jobs, including community-service jobs. Jobs
located or developed under the program may be for either a for-profit
or nonprofit employer. A school is not allowed to use its JLD
allocation to locate on-campus service jobs. The federal funds that a
school sets aside from its FWS allocation to be used for JLD
activities may be used to pay up to 80 percent of allowable costs.
The school must provide the remaining 20 percent of allowable
costs, either in cash or services.

Debit this account for:

- Amounts paid to the institution (contra account # 1-1).

Credit this account with:

- Closing entry at the end of the accounting period, the amounts
paid to the institution during the reporting period (contra
account # 6-1).

7 - 6 ADMINISTRATIVE COST ALLOWANCE (ACA) PAID TO
INSTITUTION: This expense account is maintained to record
payments made to the institution in reimbursement for administrative
expenses. Such payments to the institution have totals limited by
regulations, and they may not be made from FWS funds unless
students earned FWS wages during the period. (See section 3.3.)

Debit this account for:

- Payments to institution for administrative expenses (contra
account # 1-1).

Credit this account with:

- Closing entry at the end of the accounting period, the total amount
paid to the institution during the repoorting period (contra
account # 6-1).

5.3.1.7 Federal Perkins Loan Account

1 - 1 CASH, FEDERAL PERKINS LOANS: This is a debit balance
account that shows the total cash available.

Debit this account for:

- Federal capital contributions (FCCs) as transferred from ED/PMS
cash (contra account # 6-1).

- Institutional capital contributions (ICCs) as transferred from
institutional cash (contra account # 6-2).

- Refunds of amounts advanced to students (contra account # 1-2).

- Collections of loan principal from borrowers (contra
account # 2-1).

- Collections of loan interest from borrowers (contra account # 6-3).

- Collections of late charges assessed (contra account # 6-4).

- Collections of penalty charges assessed (contra account # 6-5).

- Other income (contra account # 6-5).

- Reimbursements from the U.S. government on loan cancellations
(contra account # 6-6).

- Repayments from borrowers for litigation expenses (contra
account # 7-1).

- Collections of borrower-paid collection costs from gross-
remittance collection agencies (contra account # 7-3).

Credit this account with:

- Advances to students (contra account # 1-2).

- Overpayments refunded to borrowers (contra account # 2-1).

- Reversals of payments made by returned check (contra
accounts # 2-1, 6-3, 6-4, 6-5, 7-3).

- Repayments of capital to the U.S. government (contra
account # 6-7).

- Repayments of capital to the institution (contra account # 6-8).

- Withdrawals of late charges payable to the institution (contra
account # 6-4).

- Withdrawals for payment of litigation expenses (contra
account # 7-1).

- Withdrawals for administrative cost allowance (contra
account # 7-2).

- Withdrawals for payment of collection costs to gross-remittance
collection agencies (contra account # 7-3).

- Withdrawals for payment of other collection expenses (contra
account # 7-3).

1 - 2 FUNDS ADVANCED TO STUDENTS: This debit balance
account is a control account for advances to borrowers. The total of
the amounts shown as advances on individual student master records
for all students should be reconciled to the balance in this account at
the end of each month. (See section 2.8.9.)

Debit this account for:

- The amount advanced to borrowers (contra account # 1-1).

Credit this account with:

- Any return of advances made (contra account # 1-1).

2 - 1 LOAN PRINCIPAL COLLECTED: This is a credit balance
account maintained to show the total amount of loan principal
collected since the beginning of the program.

Debit this account for:

- The principal amount of returned checks (contra account # 1-1).

- Overpayments refunded to borrowers (contra account # 1-1).

Credit this account with:

- The amount of cash collections related to loan principal (contra
account # 1-1).

- Reclassification of the amount of interest paid that is subsequently
cancelled (contra account # 2-1).

2 - 2 DEFAULTED LOAN PRINCIPAL - ASSIGNED TO
FEDERAL GOVERNMENT: This credit balance account is
maintained to show the cumulative amount of defaulted loan
principal assigned to and accepted by the U.S. government.

Debit this account for:

- No entries, except for correcting errors.

Credit this account with:

- The amount of loan principal assigned to and accepted by the U.S.
government on loans in default (contra account # 7-18).

2 - 3 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(10% RATE), LOANS MADE PRIOR TO 7/1/72

2 - 4 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(15% RATE), LOANS MADE PRIOR TO 7/1/72

2 - 5 LOAN PRINCIPAL CANCELLED - MILITARY SERVICE
(12.5% RATE), LOANS MADE PRIOR TO 7/1/72

Accounts # 2-3, 2-4, and 2-5 may be merged and maintained as one
account and titled "Loan Principal Cancelled - Loans Made Prior to
7/1/72."

2 - 6 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(15% RATE), LOANS MADE 7/1/72 AND AFTER

2 - 7 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(20% RATE), LOANS MADE 7/1/72 AND AFTER

2 - 8 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(30% RATE), LOANS MADE 7/1/72 AND AFTER

2 - 9 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(FIELD OF EXPERTISE: MATH, SCIENCE, FOREIGN
LANGUAGE, BILINGUAL EDUCATION) (15% RATE), LOANS
MADE 7/23/92 AND AFTER

2 - 10 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(FIELD OF EXPERTISE: MATH, SCIENCE, FOREIGN
LANGUAGE, BILINGUAL EDUCATION) (20% RATE), LOANS
MADE 7/23/92 AND AFTER

2 - 11 LOAN PRINCIPAL CANCELLED - TEACHING SERVICE
(FIELD OF EXPERTISE: MATH, SCIENCE, FOREIGN
LANGUAGE, BILINGUAL EDUCATION) (30% RATE), LOANS
MADE 7/23/92 AND AFTER

2 - 12 LOAN PRINCIPAL CANCELLED - MILITARY SERVICE
(12.5% RATE), LOANS MADE 7/1/72 AND AFTER

2 - 13 LOAN PRINCIPAL CANCELLED - DEATH

2 - 14 LOAN PRINCIPAL CANCELLED - DISABILITY

Accounts # 2-13 and 2-14 may be merged and maintained as one
account and titled "Loan Principal Cancelled - Death or Disability."

All other cancelled-loan entries are similar and are not shown here.
Refer to the chart of accounts in section 5.3.1.1 for the other
cancellation accounts.

These separate cancellation accounts are maintained to show the
cumulative amounts of loan principal cancelled under the provisions
of the law.

Debit these accounts for:

- No entries, except for correcting errors.

Credit these accounts with:

- Amounts of each appropriate category of loan principal cancelled
under the provisions of the law (contra accounts # 7-4
through 7-17).

2 - 29 LOAN PRINCIPAL ADJUSTMENTS - OTHER: This is a
credit balance account maintained to show the cumulative total
amount of loan principal lost because of other reasons (such as write-
offs) as specified by ED. Each credit entry to this account should be
adequately labeled to identify the reason for the adjustment.

Debit this account for:

- No entries, except for correcting errors.

Credit this account with:

- Amount of loan principal lost because of other approved reasons
(write-offs) (contra account # 7-19).

4 - 1 FEDERAL FUND BALANCE: This is a credit balance
account maintained to show the federal share of the fund balance.

This account should always show a credit balance for the federal
share of income and expenses since the school began participating in
the program.

Credit this account with:

- Closing entry at end of accounting fiscal year (federal share of
contra accounts # 6-1, 6-3 through 6-7, 7-1 through 7-19).

4 - 2 INSTITUTIONAL FUND BALANCE: This credit balance
account is maintained to show the institutional share of the fund
balance. This account should always show a credit balance for the
institutional share of income and expenses since the school began
participating in the program.

Credit this account with:

- Closing entry at end of accounting fiscal year (institutional share
of contra accounts # 6-2 through 6-6, 6-8 through 7-19).

6 - 1 FUNDS TRANSFERRED FROM ED/PMS - PERKINS - FCC:
This debit balance account is maintained to track the total FCC
transferred to the Perkins Loan fund from the ED/PMS cash control
account.

Debit this account for:

- Closing entry at end of accounting fiscal year (contra
account # 4-1).

Credit this account with:

- Transfer from ED/PMS - FCC (contra account # 1-1).

6 - 2 FUNDS TRANSFERRED FROM INSTITUTION - PERKINS
- ICC: This debit balance account is maintained to track the total
ICC transferred to the Perkins Loan fund from the institution.

Debit this account for:

- Closing entry at end of accounting fiscal year (contra
account # 4-2).

Credit this account with:

- Mandatory transfers of the institution's matching share of the
Perkins Loan allocation. This is one-third (33 1/3 percent) of the
FCC amount or one-quarter (25 percent) of the combined FCC
plus ICC (contra account # 1-1).

6 - 3 INTEREST EARNED ON LOANS: This credit balance
account is maintained to show the total interest that has been
collected or has been cancelled because of teaching service, military
service, death, or any other authorized cancellation. It also includes
interest from loans assigned to ED.

Debit this account for:

- The interest amount of returned checks and correction of errors
(contra account # 1-1).

- Reclassification of the interest amount paid that is subsequently
cancelled (contra account # 2 -1).

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

Credit this account with:

- The amount of loan interest collected (contra account # 1-1).

- The amount of loan interest cancelled for teaching service (contra
accounts # 7-4, 7-5).

- The amount of loan interest cancelled for Teaching Service (Field
of Expertise: Math, Science, Foreign Language, Bilingual
Education), Loans Made 7/23/92 and After (contra account # 7-7).

- The amount of loan interest cancelled for military service (contra
accounts # 7-6, 7-8).

- The amount of loan interest cancelled for death (contra
account # 7-9).

- The amount of loan interest cancelled for disability (contra
account # 7-10).

- The amount of loan interest cancelled for bankruptcy (contra
account # 7-11).

- The amount of loan interest cancelled for Peace Corps or VISTA
(contra account # 7-12).

- The amount of loan interest cancelled for Head Start (contra
account # 7-13).

- The amount of loan interest cancelled for Volunteer Service
(contra account # 7-14).

- The amount of loan interest cancelled for Law Enforcement and
Corrections Officer (contra account # 7-15).

- The amount of loan interest cancelled for Nurse/Medical
Technician (contra account # 7-16).

- The amount of loan interest cancelled for Child/Family and Early
Intervention Service (contra account # 7-17).

- The amount of loan interest related to defaulted loans assigned to
the U.S. government (contra account # 7-18).

- The amount of loan interest written off for other costs or losses
(specify) (contra account # 7-19).

6 - 4 OTHER EARNINGS - LATE CHARGES ON LOANS MADE
7/1/87 AND AFTER: This credit balance account is maintained to
show the earnings of the fund due to late charges assessed on loans
made after 7/1/87.

Debit this account for:

- Late charge amounts reimbursed to the institution (contra
account # 1-1).

- Late charge amounts of returned checks (contra account # 1-1).

- Late charge amounts for correcting errors.

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

Credit this account with:

- Late charges assessed and collected (contra account # 1-1).

- Amounts reimbursed by the institution for the late charge portion
of returned checks (contra account # 1-1).

- Late charges accrued and written off (contra account # 7-18).

6 - 5 OTHER EARNINGS - MISCELLANEOUS: This credit
balance account is maintained to show the earnings of the fund (other
than interest on student loans or late charges assessed on loans made
1/1/86 and after), such as penalty charges on loans made 12/31/85
and before, and interest earned on fund cash balances. As it will be
necessary to report separately on each type of earnings (penalty
charges, interest, earnings, and so on), a subsidiary ledger account
for each type of earnings is desirable. There may be periods when
slack demand for loans, coupled with funds received for collection
activities, might produce a temporary excess cash balance in the
Perkins Loan fund; as a result, institutions are now required to
maintain fund balances in insured interest-bearing accounts. (See
section 4.5.)

Debit this account for:

- Penalty charges for returned checks (contra account # 1-1).

- Correcting errors.

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

Credit this account with:

- Penalty charges assessed and collected (contra account # 1-1).

- Interest earned on fund cash (contra account # 1-1).

- Any other earnings of the fund (contra account # 1-1).

- Penalty charges accrued and written off (contra account # 7-19).

6 - 6 REIMBURSEMENT OF AMOUNTS CANCELLED ON
LOANS MADE 7/1/72 AND AFTER: This credit balance account is
maintained to show the amounts received from the U.S. government
as a result of reimbursements on loans cancelled for teaching (Head
Start) and military service on loans made 7/1/72 and after, for Peace
Corps or VISTA service for loans made after 6/30/87, for
employment in law enforcement or as a corrections officer for loans
made on or after 11/29/90, and for all cancellations authorized by the
1992 reauthorization of the Higher Education Act (HEA).

Debit this account for:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

Credit this account with:

- Amounts received from the U.S. government for reimbursement
of the aggregate amount of institutional funds plus federal funds
cancelled due to any of the authorized cancellation provisions
(contra account # 1-1).

6 - 7 REPAYMENTS TO FEDERAL GOVERNMENT: This debit
balance account is maintained to show the total distribution of fund
capital in case of partial dissolution of the Perkins Loan fund.

Debit this account for:

- Amount of the appropriate federal capital contribution (FCC)
repaid in partial dissolution of the fund (contra account # 1-1).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
account # 4-1).

6 - 8 REPAYMENTS TO INSTITUTION: This debit balance
account is maintained to show the total distribution of fund capital in
case of partial dissolution of the Perkins Loan fund and to show
when an institution withdraws an overmatch.

Debit this account for:

- Amount of the appropriate institutional capital contribution (ICC)
repaid in partial dissolution of the fund (contra account # 1-1).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
account # 4-2).

7 - 1 LITIGATION EXPENSES: This is a debit balance account
maintained to show the net amount paid for litigation arising in
connection with Federal Perkins Loans.

Debit this account for:

- Amounts paid for litigation expenses (contra account # 1-1).

Credit this account with:

- Amounts collected from borrowers in repayment of litigation
expenses (contra account # 1-1).

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 2 ADMINISTRATIVE COST ALLOWANCE (ACA) PAID TO
INSTITUTION: This is a debit balance account maintained to show
the amount of administrative expenses charged to the fund in lieu of
reimbursement to the institution. Such payments to the institution
are limited in total by regulations and may not be made from the
Perkins Loan fund unless students receive advances of Perkins Loan
funds during the award period. (See section 3.3.)

Debit this account for:

- Amounts charged to the fund as authorized administrative cost
allowance (ACA) (contra account # 1-1).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 3 OTHER COLLECTION EXPENSES: This is a debit balance
account maintained to show the net amount charged to the fund for
collection expenses other than costs of litigation, such as
commissions (as approved by the U.S. Secretary of Education) paid
to a collection agency.

Debit this account for:

- Amounts authorized to be charged to the fund as other collection
expenses (contra accounts # 1-1 or 2-1).

- Amount of borrower-paid collection cost portion of returned
checks (contra account # 1-1).

Credit this account with:

- Amounts collected from borrowers in repayment of costs of
collection other than litigation expenses (contra account # 1-1).

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 4 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - TEACHING SERVICE, LOANS MADE PRIOR
TO 7/1/72

7 - 5 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - TEACHING SERVICE, LOANS MADE 7/1/72
AND AFTER

These debit balance accounts are maintained to show the total cost of
cancellations for teaching service.

Debit these accounts for:

- Amounts of total principal and interest cancelled for teaching
service (contra accounts # 2-3, 2-4, 2-6, 2-7, 2-8, 6-3).

Credit these accounts with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 6 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - MILITARY SERVICE, LOANS MADE PRIOR TO
7/1/72

7 - 7 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - TEACHING SERVICE (FIELD OF EXPERTISE:
MATH, SCIENCE, FOREIGN LANGUAGE, BILINGUAL
EDUCATION), LOANS MADE 7/23/92 AND AFTER

These debit balance accounts are maintained to show the total cost of
cancellations for military and teaching service.

Debit these accounts for:

- Amounts of total principal and interest cancelled for these specific
service areas (contra accounts # 2-5, 2-9, 2-10, 2-11, 6-3).

Credit these accounts with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 8 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - MILITARY SERVICE 7/1/72 AND AFTER

These debit balance accounts are maintained to show the total cost of
cancellations for military service.

Debit these accounts for:

- Amounts of total principal and interest cancelled for military
service (contra accounts # 2-12, 6-3).

Credit these accounts with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 9 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - DEATH: This is a debit balance account
maintained to show the total cost of cancellations for death.

Debit this account for:

- Amounts of total principal and interest cancelled for death (contra
accounts # 2-13, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 10 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - DISABILITY: This is a debit balance account
maintained to show the total cost of cancellations for disability.

Debit this account for:

- Amounts of total principal and interest cancelled for disability
(contra accounts # 2-14, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 11 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - BANKRUPTCY: This is a debit balance account
maintained to show the total cost of cancellations for bankruptcy.

Debit this account for:

- Amounts of total principal and interest cancelled for bankruptcy
(contra accounts # 2-15, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 12 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - PEACE CORPS OR VISTA: This is a debit balance
account to show the total cost of principal and interest cancelled for
service in the Peace Corps or VISTA for loans made after June 30,
1987.

Debit this account for:

- Amounts of total principal and interest cancelled for service in the
Peace Corps or VISTA (contra accounts # 2-16, 2-17, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 13 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - HEAD START: This is a debit balance account to
show the total cost of principal and interest cancelled for the Head
Start Program.

Debit this account for:

- Amounts of total principal and interest cancelled for the Head
Start Program (contra accounts # 2-18, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 14 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - VOLUNTEER SERVICE: This is a debit balance
account to show the total cost of principal and interest cancelled for
volunteer service.

Debit this account for:

- Amounts of total principal and interest cancelled for volunteer
service (contra accounts # 2-19, 2-20, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 15 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - LAW ENFORCEMENT AND CORRECTIONS
OFFICER: This is a debit balance account to show the total cost of
principal and interest cancelled for borrowers employed in law
enforcement or corrections.

Debit this account for:

- Amounts of total principal and interest cancelled for a borrower's
employment as a law-enforcement or corrections officer (contra
accounts # 2-21, 2-22, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 16 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - NURSE/MEDICAL TECHNICIAN: This is a debit
balance account to show the total cost of principal and interest
cancelled for a borrower's employment as a nurse or medical
technician.

Debit this account for:

- Amounts of total principal and interest cancelled for a borrower's
employment as a nurse or medical technician (contra
accounts # 2-23, 2-24, 2-25, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 17 COST OF LOAN PRINCIPAL AND INTEREST
CANCELLED - CHILD/FAMILY AND EARLY INTERVENTION
SERVICE: This is a debit balance account to show the total cost of
principal and interest cancelled for a borrower's employment in a
child/family or early intervention service.

Debit this account for:

- Amounts of total principal and interest cancelled for the
child/family or early intervention service (contra
account # 2-26, 2-27, 2-28, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 18 COST OF DEFAULTED LOAN PRINCIPAL AND
INTEREST ASSIGNED TO FEDERAL GOVERNMENT: This is a
debit balance account maintained to show the total cost of defaulted
loans assigned to, and accepted by, the U.S. government.

Debit this account for:

- Amounts of total principal and interest related to defaulted loans
assigned to the U.S. government (contra accounts # 2-2, 6-3).

Credit this account with:

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

7 - 19 OTHER COSTS OR LOSSES: This is a debit balance
account maintained to show the total amount of other costs or losses.
Any entries to this account, such as accounts written off, should have
full documentation of the reasons for the write-offs. In some cases,
approval by the U.S. Secretary of Education must be included as part
of the documentation.

Debit this account for:

- Amounts of total principal, interest, penalty, and late charges
written off because of other costs or losses. The reason for the
write-off should be specified for easy identification in the account
(contra accounts # 2-29, 6-3, 6-4, 6-5).

Credit this account with:

- Amounts of previous write-offs reversed due to collection (contra
accounts # 2-29, 6-3, 6-4, 6-5).

- Closing entry at end of accounting fiscal year (contra
accounts # 4-1, 4-2).

5.3.1.8 William D. Ford Federal Direct Loan Account

1 - 1 CASH, FEDERAL DIRECT LOANS: All receipts and
disbursements of cash related to the Federal Direct Loan Program are
recorded in this account.

Debit this account for:

- Transfers from ED/PMS accounts (contra account # 6-1).

- Recoveries from recipients (contra account # 7-1).

Credit this account for:

- Payments to students (contra account # 7-1).

- Return of excess cash to Direct Loan Servicing Center or to ED
via FEDWIRE (contra account # 6-1).

1 - 2 ACCOUNTS RECEIVABLE, ED/PMS: This debit balance
account controls the transfer of cash directly from the ED/PMS
account established for Direct Loans.

Debit this account for:

- Amounts due from ED/PMS for disbursement needs for the period
(contra account # 6-1).

- Return of excess cash (contra account # 1-1).

Credit this account with:

- Cash transferred directly from the ED/PMS account (contra
account # 1-1).

6 - 1 INCOME FROM ED/PMS - FEDERAL DIRECT LOANS:
This credit balance account reflects the income from the Direct Loan
Program. This amount is not a transfer from the ED/PMS account
referred to in section 5.3.1.2. These separate accounts allow for
reconciliation with the institution's records as part of the Direct Loan
reconciliation process. (See Chapter 6, section 6.1.2.1.)

Debit this account for:

- Closing entry at end of accounting fiscal year, the income from
ED/PMS to meet disbursement needs for the period (contra
accounts # 7-1, 7-2).

Credit this account with:

- Income from ED/PMS recorded to meet current disbursement
needs (contra account # 1-2).

6 - 2 FEDERAL REIMBURSEMENT OF DIRECT LOAN
ORIGINATION SERVICES COSTS: This credit balance account is
maintained to record the reimbursements from ED for the origination
services costs. Presently, funds come directly to the institution via
ACH/EFT and are deposited directly to the bank account of the
institution. This amount is set by law.

Debit this account for:

- Closing entry at end of the accounting period (contra
account # 7-2).

Credit this account with:

- ACH/EFT payments for ED for origination services costs (contra
account # 1-1).

7 - 1 FUNDS ADVANCED TO BORROWERS: This debit balance
account is maintained to record payments made to students or parents
for loans. This account may be further subdivided to separate
disbursements for PLUS, subsidized, and unsubsidized loans.

Debit this account for:

- Loan payments made to students or students' parents (contra
account # 1-1).

Credit this account with:

- Recoveries from loan recipients (contra account # 1-1).

- Closing entry at end of accounting fiscal year for the total amount
of loan disbursements made to students or students' parents for the
accounting period (contra account # 6-1).

7 - 2 PAYMENT FOR ORIGINATION SERVICES (POS)*25*
(PAID TO INSTITUTION): This debit balance account is
maintained to record payments made to the Level 1 or Level 2
institutions for origination services.

Debit this account for:

- The amount paid to the institution (contra account # 1-1).

Credit this account with:

- Closing entry at the end of the accounting period (contra
account # 6-2).

5.3.2 Accounting Practices for EFT: Federal Family Education
Loan (FFEL) Program

1 - 1 CASH, FFEL ACCOUNT: All receipts and disbursements of
FFEL funds are recorded in this account. These funds are not part of
the ED/PMS system, as the funds come directly from lenders to the
institution by lenders' EFT systems.

- Debit - Cash received from lenders (contra account # 3-1).

1 - 2 CASH RETURNED TO LENDERS: This account is used to
account for funds returned to lenders and is separate from funds
disbursed to students.

- Credit - Cash returned to lenders (contra account # 3-1).

1 - 3 CASH DISBURSED TO BORROWERS: This account shows
funds actually disbursed to students or parents for loans.

- Credit - Cash disbursed to borrowers (contra account # 3-1).

1 - 4 CASH - INTEREST EARNINGS: This account may be used
to record interest earnings from investing the float on FFEL funds.
Institutions may decide to deposit the interest earnings directly into
an operating account.

- Debit - For interest earned (contra account # 6-1).

- Credit - Interest earnings from investment of FFEL funds
transferred to the institution (contra account # 6-1).

3 - 1 FFEL TRUST ACCOUNT: This account is used to record
funds that the institution holds for borrowers.

- Debit - Funds disbursed to borrowers or returned to lenders
(contra accounts # 1-2 or 1-3).

- Credit - Funds received from lenders (contra account # 1-1).

6 - 1 INTEREST EARNINGS FROM INVESTMENT OF FFEL
FUNDS: The institution must closely adhere to required time frames
for disbursing funds and returning undisbursed funds.

- Debit - Cash, interest earnings transferred to the institution (contra
account # 1-4).

- Credit - Interest earnings from investment of FFEL funds (contra
account # 1-4).


*19* ED/PMS is the only case in which income and expense ledgers
are not maintained.

*20* If the institution tracks funds advanced to students out of
school, this information may be placed as a footnote to the subsidiary
ledger.

*21* It is also called "fees for origination."

*22* A different accounting treatment would be necessary if an
institution uses the reimbursement payment method for drawing
down Title IV funds (34 CFR 668.163 [a][3], Requesting Funds,
Federal Register, Vol. 59, No. 230, Thursday, December 1, 1994).

*23* Full-time students working in FWS jobs need not pay FICA if
they are employed on campus.

*24* Note: A student may be exempt from withholding while
enrolled. But if the student is employed between terms or in the
summer, when the student is not enrolled, withholding must be
made.

*25* This payment is also called "fees for origination."

Last Modified: 06/30/1995