PublicationDate: 7/1/95 ChapterNumber: ChapterTitle: Appendix A: Glossary SectionNumber: SectionTitle: Glossary PageNumbers: A1-A30 ACADEMIC YEAR (AY) A time period of at least 30 instructional weeks in which a full-time undergraduate student is expected to complete: - 24 semester or trimester hours or 36 quarter hours at an institution using credit hours in an educational program whose length is measured in credit hours, OR - at least 900 clock hours at an institution using clock hours. However, there is an exception for those schools with at least a 2- year or 4-year academic program with an associate or bachelor's degree. Those schools may request, in writing, that ED reduce the minimum period of instructional time of the academic year for any of its programs as long as they are at least 26 weeks in length. ACCEPTED WITH ASSUMPTIONS A category of Federal Pell Grant Processed Payment data that was found to be inaccurate but for which the Pell Grant Recipient and Financial Management System (PGRFMS) made certain assumptions during processing. A school must review the records carefully and resubmit them if corrections are necessary. ACCEPTED WITHOUT CHANGE OR ASSUMPTIONS A category of Federal Pell Grant processed payment data returned to a school by the Pell Grant Recipient and Financial Management System (PGRFMS) that the school must keep on file. A school should not resubmit these records to the CPS unless the award-year data changes. ACCOUNTING FOR RESTRICTED FUNDS FOR LIMITED PURPOSES A restricted fund made up of a self-balancing group of accounts: assets, liabilities, capital (fund balance), revenues, and expenses. It is important to note that individual funds are separated completely from one another and from the general fund of the institution and are self-balancing. That is, the debit balances of the debit accounts within the fund equal the credit balances of the credit accounts within the fund. This ensures the integrity of individual funds and provides control over fund expenditures. "Restricted" means that the use of the funds has been restricted to some specific activity by donors and/or other external parties. ACCOUNTING PERIOD A time period for which financial records are maintained and at the end of which financial statements are prepared. See FINANCIAL STATEMENT. ACCRUAL BASIS The type of accounting under which incomes are recorded when earned (regardless of when cash is actually received) and expenses are recorded when liabilities are incurred (regardless of when cash is actually expended). ACCRUED SALARIES Wages earned by students between the date that the students were last paid and the end of the accounting period being reported, but not yet paid to the students. The unpaid student wages are considered a school liability. ACH AND ACH/EFT See AUTOMATED CLEARINGHOUSE (ACH). ACID-TEST RATIO A factor of financial responsibility required for both nonprofit and profit institutions. These schools must maintain a one-to-one ratio of cash and current receivables to current liabilities. ADJUSTING ENTRY A journal entry made for purposes of correcting an error (such as a transfer of an amount from one account) or recording an accrual (such as earned, but unpaid, student payroll at the end of an accounting period). ADMINISTRATIVE CAPABILITY A requirement an institution must meet to participate in Title IV student aid programs. Administrative capability covers specific areas in the management of an institution. These areas include: - establishing and maintaining student records and financial records, - submitting required ED reports, - designating a capable Title IV aid administrator at an institution, - writing procedures for school offices involved with Title IV programs, - communicating to the financial aid administrator all information received by any school office that might affect a student's Title IV aid eligibility, - dividing the functions of authorizing payments and disbursing funds, and - employing an adequate number of qualified staff. ADMINISTRATIVE COST ALLOWANCE (ACA) A dollar figure the federal government allots an institution to offset the cost of administering a Title IV program. ADMINISTRATIVE OFFSET An offset assessed by ED against a Title IV aid school to collect program review, audit, and formal fine debts. ED will withhold a portion of a school's ED/PMS payments and apply them toward the school's debt. AGENCY FUNDS The conduit or clearing house funds established to account for assets (usually cash) received for, and paid to, other funds, individuals, or organizations. Externally designated scholarship funds are an example of agency funds. Because assets received this way are held briefly, to be disposed of at the direction of others, only asset and liability accounts are needed in such a relationship. ALLOCATION A specific sum of money awarded for an institution to use during a specific period. Campus-based funds (Federal Supplemental Educational Opportunity Grant, Federal Work-Study, and Federal Perkins Loan) are allocated to an institution on an award-year basis. Allocation may also be referred to as obligation, award authorization, grant authorization, or Document Number. See DEOBLIGATION and SUPPLEMENTAL APPROPRIATION. ALLOCATION ORDER A priority list, established by ED, that states the order in which refunds are to be made to federal financial aid program accounts if a student withdraws, drops below half-time status, is expelled, or drops out during the refund period. By law, refunds must be allocated to Title IV programs in specified order, as follows: 1. Federal Family Education Loan (FFEL) Program, 2. Federal Direct Loan Program, 3. Federal Perkins Loan Program, 4. Federal Pell Grant Program, 5. Federal Supplemental Educational Opportunity Grant (FSEOG) Program, AND 6. All other Title IV programs. Prior to the 1994-95 award year, the order in which federal funds were refunded was determined by each school in its refund allocation policy. See REFUND and REFUND POLICY. APPROPRIATION At the federal level, a Congressional legislative act allocating a specific amount of public funds to be spent for a specific purpose during a fiscal or award year. The dollar amount appropriated may be equal to or less than (but not more than) the total amount permissible under the authorizing statute. An appropriation bill originates in the House of Representatives. General appropriation acts are supposed to be approved by both houses of Congress by the seventh day after Labor Day before the start of the fiscal year to which they apply. Continuing resolutions allocate funds for expenditures when the appropriations bill for the new fiscal year has not been enacted. See CONTINUING RESOLUTION and SUPPLEMENTAL APPROPRIATION. ASSETS Owned property that must be reported on a student financial aid application. These are financial holdings such as cash on hand in checking and savings accounts, trusts, stocks, bonds, other securities, loan receivables, real estate (excluding the home), business equipment, and business inventory. ASSIGNMENT A school's transfer of a defaulted National Defense Student Loan, National Direct Student Loan, or Federal Perkins Loan to ED for collection. Once ED accepts a loan, it acquires all rights, title, and interest on the assigned loan. In certain cases, guaranty agencies also assign defaulted loans under the FFEL Program to ED. AUDIT An independent examination of a school's financial transactions, accounts, reports, and compliance with applicable laws and regulations to determine whether the institution is maintaining effective control over revenues, expenditures, assets, and liabilities; whether the institution is properly accounting for resources, liabilities, and operations; whether financial reports contain accurate, reliable, and useful financial information and are accurately presented; and whether the institution is complying with applicable laws, regulations, and ED directives. A financial audit also studies and evaluates the institution's internal accounting and administrative controls, as well as the policies, procedures, and practices used in administering student financial assistance programs. See INDEPENDENT AUDIT. AUDIT EXCEPTIONS School actions found through an audit that are not in compliance with federal guidelines. AUDIT GUIDE A federal reference manual designed to assist independent auditors performing audits of Title IV student financial aid programs. AUDIT REPORT A report prepared by ED after a federal audit is performed. In a nonfederal audit, an audit report is a report prepared by an auditor or audit firm according to the guidelines provided in the Audit Guide and ED's Dear Colleague Letter GEN-92-17 (Non- Federal Technical Bulletin 92-1) or according to OMB Circulars A- 128 or A-133. See FEDERAL AUDIT. AUDIT TRAIL A clear (easily followed) trail that is provided by maintaining required documentation to support each school transaction that deals with receiving and expending federal funds. AUTHORIZATION (LEGISLATIVE) At the federal level, a Congressional legislative act that establishes a program, specifies its general purpose and conduct, and unless open-ended, sets a ceiling for the dollar amount that can be used to finance it. An authorization must be enacted before dollar amounts can be appropriated for program spending. AUTHORIZATION (SPENDING) The approved expenditure level for a program for an award year. Each award year, ED notifies each participating institution of its authorized levels of expenditures for the Federal Pell Grant and Federal Perkins Loan Programs. See OFFICIAL NOTICE OF FUNDING and STATEMENT OF ACCOUNT (SOA). AUTOMATED CLEARINGHOUSE (ACH) A nationwide, electronic financial network providing a paperless, efficient means of making payments by electronically transmitting debits and credits through the Federal Reserve Communications System. ACH payments offer a wide range of applications, including direct deposit and preauthorized debits. Also referred to as Automated Clearinghouse/Electronic Funds Transfer (ACH/EFT). AUTOMATED FEDWIRE SYSTEM A new process that allows schools receiving funds by FEDWIRE to place payment requests via PC directly into the ED/PMS. This system provides payments to be made the same day, be made the next day, or warehouses a payment request for up to 30 days. See FEDWIRE. AUTOMATED SUSPENSION OF FUNDS The automated decrease of an allocation (authorization amount) listed on a quarterly report or MEERS (monthly report) to the expenditure amount (disbursement amount) listed on that report. This decrease occurs when an inactive award (allocation) is closed (refer to "Status of Award" on pages 59- 60 of the Glossary in the Recipient's Guide for the Department of Education Payment Management System). As a result, the school must adjust its own expenditure records for that allocation to that disbursement amount. AUTOMATED VOICE RESPONSE (AVR) An option for placing requests for ACH payments through a service bureau. This request is made via a touch-tone telephone. It represents one of two payment- request modes available to schools. Compare OPERATOR ASSISTED MODE. AWARD A specific amount of financial assistance to pay for education costs offered to a student through one or more financial aid programs. Also, the approval of financial assistance to students, as in one function of an institution is to award campus-based financial aid to students who meet all the eligibility criteria. AWARD ADJUSTMENT OR REVISION An action by a financial aid office resulting in an increase, decrease, program-source substitution, or cancellation of a student's financial aid award. This may be necessitated by factors such as a change in the student's enrollment status or a change in the financial circumstances of the student's family or the student. AWARD PACKAGING See PACKAGING. AWARD YEAR The time period from July 1 of one year through June 30 of the following year for which financial aid awards are made. The award year differs from the federal fiscal year. BATCH A group of records assembled in a single file that is then transmitted electronically as one unit to ED. BILLING SERVICE A private-sector business organization that services loan accounts (billing and/or receiving) for lenders and schools. A fee is charged for the service. BOOKKEEPING Analyzing, classifying, and recording financial transactions in accordance with a preconceived plan to provide a means by which an organization's business may be conducted in an orderly fashion and to establish a basis for reporting the financial condition of an organization and the results of its operation. Two methods of bookkeeping are in use--single entry and double entry. See DOUBLE ENTRY BOOKKEEPING and SINGLE ENTRY BOOKKEEPING. BUSINESS OFFICE The school office responsible for an institution's financial accounting, including Title IV aid program activity. The office disburses financial aid award payments to students and student accounts and processes loan checks. At various schools, it is sometimes referred to as the fiscal office, finance office, comptroller's office, bursar's office, treasurer's office, or student accounts office. See SEPARATION OF FUNCTIONS. ROBERT C. BYRD HONORS SCHOLARSHIP A Title IV financial aid program that makes scholarships available to full-time postsecondary students with exceptional academic ability and promise. Students apply for the merit-based scholarships through their state education agencies. The program was created in 1984 and named to honor Senator Robert C. Byrd. CAMPUS-BASED PROGRAMS The term applied to three federal Title IV student aid programs administered on campus by eligible institutions of postsecondary education: - Federal Perkins Loan Program, - Federal Work-Study (FWS) Program, and, - Federal Supplemental Educational Opportunity Grant (FSEOG) Program. See individual program names. CANCELLATION (OF A LOAN) This occurs when a borrower meets specific requirements that permit nullifying the borrower's obligation to repay all or a designated portion of principal and interest on a student loan. It may also be referred to as "discharge." CAPITALIZING INTEREST A process in which interest that has accrued but not been paid is added to the loan principal for both the FFEL and Federal Direct Loan Programs. Capitalizing is a consequence of delaying interest payments; it increases the amount of the principal and, consequently, the total amount that must be repaid. CARRY FORWARD/CARRY BACK A special provision of the Federal Work-Study (FWS) Program that allows an institution to transfer up to 10 percent of its annual FWS allocation back to the previous award year or forward to the next award year. In addition, as of October 1, 1992, a school may carry back funds from the current award year to pay student wages earned from May 15 through June 30 of the previous award year. See FEDERAL WORK-STUDY (FWS) PROGRAM. CASH ADVANCE A transfer of funds from a federal agency (account in the U.S. Treasury through the Federal Reserve Bank) to a school. CASH POOLING For institutions permitted to do so, depositing federal funds for all of the Title IV aid programs in a single bank account. CENTRAL PROCESSING SYSTEM (CPS) ED's Central Processing System (CPS) analyzes information from Free Applications for Federal Student Aid (FAFSAs) and calculates Expected Family Contributions (EFCs). A series of edits is used to check the consistency of family-supplied and student-supplied information. Eligibility matches are also conducted with the U.S. Social Security Administration, the U.S. Department of Justice, the U.S. Immigration and Naturalization Service, and the U.S. Selective Service. In addition, each student is checked against ED's own loan- defaulter database. See NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS). CHART OF ACCOUNTS A list of financial account numbers and account titles arranged in a systematic way to help institutions identify the accounts in their fiscal management system and ledgers. These accounts form the foundation for the school's Title IV reporting process. CLOSING The process of preparing, entering, and posting closing entries. A closing entry is a journal entry in which balances in revenue and expense accounts are eliminated at the end of the accounting period (calendar year or fiscal year). Because revenue and expense accounts provide the information for a statement of operations of a given accounting period, it is essential that these accounts have zero balances at the beginning of each new period. Asset, liability, and fund balance accounts are not closed at the end of the accounting period, as their balances carry over to the new period. CODE OF FEDERAL REGULATIONS (CFR) The compilation of all federal regulations and procedural rules. Regulations implementing Title IV programs appear as 34 CFR. COHORT DEFAULT RATE For the Federal Perkins Loan and Federal Stafford Loan Programs, the percentage of an institution's current and former students who entered student-loan repayment in a specific fiscal year on loans received for attendance at that institution and who defaulted before the end of the following fiscal year. For any fiscal year in which fewer than 30 students entered repayment, the percentage is determined on the basis of students who entered repayment as described above in any of the three most recent fiscal years and who defaulted before the end of fiscal year immediately following the year they entered repayment. See DEFAULT. COLLECTION AGENCY A business organization that accepts lenders' loan accounts that have become delinquent or are in default and attempts to collect on those accounts. A fee is charged for the service. COLLECTION COSTS Reasonable costs incurred by using a collection agency or commercial skip-trace agency in an attempt to recover delinquent or defaulted student loan funds. See COLLECTION AGENCY and SKIP TRACING. COLLEGE WORK-STUDY Term is obsolete. See FEDERAL WORK-STUDY (FWS) PROGRAM. COMPLIANCE AUDIT See AUDIT and INDEPENDENT AUDIT. CONSOLIDATION LOAN A loan originated by the Student Loan Marketing Association (Sallie Mae) or other eligible lenders. The loan can combine multiple student loans made under Title IV programs, the Health Professions Student Loan (HPSL) Program, the Health Education Assistance Loan (HEAL) Program, and the recently included Nursing Student Loan Program (NSLP) into a single loan with one monthly payment. Delinquent or defaulted borrowers may be allowed to establish a repayment schedule through a consolidation loan. Compare FEDERAL DIRECT CONSOLIDATION LOAN. CONTINUING RESOLUTION At the federal level, a Congressional joint agreement between the House and Senate to continue appropriations for specific government agencies (at rates generally determined on the basis of previous fiscal-year appropriation levels) when Congress has not yet enacted an appropriation act for those agencies for the current fiscal year. A continuing resolution must pass both houses of Congress and be signed by the President. See APPROPRIATION. CONTRA ACCOUNT The other side of an account. When used in T- account diagrams, the term "contra account" refers to the other part of the entry. For example, if a Cash Control, ED/PMS account is debited, the contra account (the account to be credited) might be Accounts Receivable, ED/PMS. If Cash Control, ED/PMS is credited, the contra account to be debited might be Expended Funds, ED/PMS. See T-ACCOUNTS. CONTROL ACCOUNT A ledger account in which posting occurs simultaneously to a number of identical, similar, or related accounts, usually called subsidiary ledger accounts. When these subsidiary ledger account balances are added together, that total should agree with the balance in the control account. A familiar example is accounts receivable. When several students have receivable balances in subsidiary accounts (an account receivable system) the sum of the balances for all the students agrees with the total in the general ledger, control account. CORRECTIVE ACTION As a part of any fine, any limitation, suspension, or termination proceeding, or any adverse finding in a report or review, ED may require a post- secondary institution to take corrective action. This action may include making payments to eligible students or repaying any illegally used funds to ED. ED may offset any funds to be repaid against any benefits or claims due to the institution. CORRECTIVE ACTION PLAN (CAP) A written plan an institution submits to ED, as required by an ED official, a hearing official, or the U.S. Secretary of Education. In this plan, the institution explains what reasonable and appropriate steps it will take to remedy any violation(s) of applicable laws, regulations, special arrangements, agreements, or limitations on present or prior financial aid audit or program review findings. COST OF ATTENDANCE (COA) Section 472 of the Higher Education Act sets forth specific statutory parameters for cost of attendance (COA) for Title IV aid programs. A student's cost of attendance includes tuitions and fees, room and board expenses while attending school, allowances for books and supplies, transportation, loan fees (if applicable), dependent-care costs, costs related to a disability, and other miscellaneous expenses. In addition, reasonable costs for a study-abroad program and costs associated with a student's employment as part of a cooperative education program may be included. There are also special rules for less-than-half-time students and correspondence-study students. The cost of attendance is estimated by the school. The cost of attendance is compared to a student's Expected Family Contribution (EFC) to determine the student's need for aid. DEFAULT For Perkins Loans: Failure of a borrower to make a loan-installment payment when due or to meet other terms of a signed promissory note or written repayment agreement. For FFEL and Direct Loans: Failure to make a loan-installment payment on (a) a loan repayable in monthly installments for 180 days or (b) for FFEL, a loan payable in less frequent installments for 240 days. There can be serious legal consequences for student-loan defaulters. See COHORT DEFAULT RATE. DEFERMENT (OF A LOAN) A period of postponement during which repaying loan principal is suspended as a result of the borrower meeting one or more of a number of deferment requirements established by law. While the borrower does not pay interest on SUBSIDIZED loans during deferment, interest expenses continue to accumulate during deferment of an UNSUBSIDIZED loan. Compare FORBEARANCE (ON A LOAN). DELIVERY In the Federal Family Education Loan Program, the process of a school transmitting loan proceeds to a borrower. See DISBURSEMENT. DEOBLIGATION Action by ED reducing all or part of an institution's allocation for a Title IV program. Deobligation usually results from an institution releasing funds back to the federal government that will not be used during the period for which the funds were allocated. See ALLOCATION and SUPPLEMENTAL APPROPRIATION. DEPARTMENT OF EDUCATION PAYMENT MANAGEMENT SYSTEM (ED/PMS) A grants financial management information system maintained by ED's Office of the Chief Financial Officer, Accounting and Financial Management Service, Financial Operations Division. DIRECT LOAN See FEDERAL DIRECT LOAN PROGRAM. DISBURSEMENT The process by which Title IV program funds are paid to a student or parent borrower. A school may: - pay a student or parent directly, - by check or other means payable to the student and requiring the student's endorsement or certification (or, in the case of a parent borrowing under the Direct Loan Program or FFEL Program, requiring the endorsement or certification of the student's parent); - by initiating an electronic funds transfer (EFT) to a bank account designated by the student (or, in the case of a parent borrower, an account designated by the parent); or - by dispensing cash to the student for which the school obtains a signed receipt from the student: OR - credit a student's account. See DELIVERY. DISCHARGE See CANCELLATION (OF A LOAN). DISTRIBUTION FORMULA A formula that federal regulations specify be used to calculate the amounts of refunds or overpayments (repayments) that must be returned to individual Title IV programs. See REFUND and REPAYMENT. DOUBLE ENTRY BOOKKEEPING The method in which each transaction involves a two-way, self-balancing journal entry with equal debit and credit amounts. This entry is then posted from the journal to the corresponding ledger accounts involved. See BOOKKEEPING. DUPLICATE (PELL PAYMENT DATA) A category of processed payment data that represents duplicates of "accepted without change or assumptions" data that an institution has already sent to the Central Processing System (CPS). The data should not be resubmitted unless the award-year data changes. See FEDERAL PELL GRANT PROGRAM. ED/PMS See DEPARTMENT OF EDUCATION PAYMENT MANAGEMENT SYSTEM (ED/PMS). ED/PMS 272 REPORT See QUARTERLY REPORT. ELECTRONIC DATA EXCHANGE (EDE) An ED software system that enables institutions to transmit, receive, and correct application data, package student awards, and transmit Federal Pell Grant and Direct Loan payment information via a telecommunications network. ELECTRONIC FISAP (FISCAL OPERATIONS REPORT AND APPLICATION TO PARTICIPATE) A computer-based report on fiscal operations and an application to participate in the upcoming award year that must be submitted by schools that participate in campus-based programs. A school may submit the data using either a personal computer or a mainframe computer. See FISAP (FISCAL OPERATIONS REPORT AND APPLICATION TO PARTICIPATE). ELECTRONIC FUNDS TRANSFER (EFT) See AUTOMATED CLEARINGHOUSE (ACH). ELECTRONIC PAYMENT VOUCHER (EPV) The formatted record of a student's Federal Pell Grant payment data that is transmitted electronically from a school to ED's Pell Grant Recipient and Financial Management System (PGRFMS). ELECTRONIC PROCESSED PAYMENT VOUCHER (EPPV) The formatted record of a student's processed Federal Pell Grant payment data that is transmitted electronically from ED's PGRFMS to a school. ELECTRONIC STUDENT AID REPORT (ESAR) Term is obsolete. See Institutional Student Information Record (ISIR). ELIGIBLE INSTITUTION A public or private nonprofit institution of higher education, a postsecondary vocational school, or a proprietary institution of higher education that meets all the criteria to participate in Title IV student financial aid programs. ELIGIBLE STUDENT The definition of a student eligible to receive federal financial aid from ED is discussed in detail in The 1995-96 Federal Student Financial Aid Handbook, Chapter 2, and Section 668.7 of the Student Assistance General Provisions regulations. EMERGENCY ACTION Action taken by ED against an eligible postsecondary institution. This action includes withholding funds from the institution or its students and withdrawing the authority of the institution to obligate federal funds under any or all of the Title IV student aid programs. Emergency action is taken when ED: - receives information that the institution is violating applicable laws, regulations, special arrangements, agreements, or limitations; - determines that the likelihood of loss to the federal government outweighs putting in place limitation, suspension, or termination procedures; and - determines that immediate action is necessary to prevent misuse of federal funds. See LIMITATION, SUSPENSION, OR TERMINATION (LS&T) and PROGRAM PARTICIPATION AGREEMENT (PPA). ENROLLMENT PERIOD For the Federal Family Education Loan (FFEL) and Federal Direct Loan Programs, the period of time for which a borrower's loan is intended and during which a student is enrolled. For a school that uses academic terms (semester, trimester, or quarter) an enrollment period must coincide with the one or more terms or with an academic year. For a school that does not use academic terms, an enrollment period must coincide with the length of a student's program of study or an academic year. Compare PAYMENT PERIOD. ENROLLMENT STATUS At those institutions using semesters, trimesters, quarters, or other academic terms and measuring progress in credit hours, enrollment status equals a student's credit-hour course load. At these schools, a full-time undergraduate student enrolls in at least 12 semester hours or 12 quarter hours each term. At those institutions measuring progress in clock hours, enrollment status equals a student's clock-hour course load. At these schools, a full-time student receives 24 hours of instruction in one week. At either type of school, student enrollment may be categorized as full-time, three-quarter-time, half-time, or less-than-half-time. At those institutions using a combination of both credit and clock hours, enrollment status for a full-time student is any combination of credit and clock hours where the sum of the following fractions is equal to or greater than one. - For a program using a semester, trimester, or quarter system: Number of credit hours per term ---------------------------------- 12 PLUS Number of clock hours per week ---------------------------------- 24 - For a program not using a semester, trimester, or quarter system: Number of semester or trimester hours per academic year ------------------------------------------- 24 PLUS Number of quarter hours per academic year --------------------------------------------- 36 PLUS Number of clock hours per week ---------------------------------- 24 At non-term institutions, enrollment status for a full-time student is 24 semester hours or 36 quarter hours per academic year or the prorated equivalent for a program of less than one academic year. ENTRANCE COUNSELING (FOR A STUDENT BORROWER) Each institution participating in the Federal Perkins, FFEL, and Federal Direct Loan Programs (excluding PLUS and Direct PLUS loans) must offer loan counseling to first-time student borrowers called "entrance" counseling. The institution must offer this counseling before the delivery of the first disbursement of any of these loans to a borrower at the institution. Entrance counseling covers the borrower's rights and responsibilities, the terms and conditions of the loan, and the consequences of default. Compare EXIT COUNSELING (FOR A STUDENT BORROWER). However, please note that Direct Loan schools have the option of using an alternative approach. (See CFR 685.304(a)(5).) ENTRANCE INTERVIEW (FOR A COMPLIANCE AUDIT) A meeting, prior to the beginning of a financial aid audit, between an auditor and school administrative officials involved in the audit. Operating rules, an agenda, and a schedule for the on-site work are established. A similar interview is conducted by a federal official prior to conducting a program review. See AUDIT. Compare EXIT INTERVIEW (FOR A COMPLIANCE AUDIT). EXIT COUNSELING (FOR A STUDENT BORROWER) Each institution participating in the Federal Perkins, FFEL, and Federal Direct Loan Programs (excluding PLUS and Direct PLUS loans) must offer loan counseling called "exit " counseling to student borrowers. For Federal Perkins borrowers, the interview must take place before the borrower leaves school. In the case of FFEL and Federal Direct Loan student borrowers, the interview must take place shortly before the borrower ceases at least half-time enrollment. During the interview, the borrower's rights and responsibilities are reviewed, details about handling loan repayment are discussed, and the average indebtedness of the school's borrowers must be disclosed. Borrowers are also required to provide updated personal information such as address, telephone number, employer (if known), and driver's license and state of issuance. See The 1995-96 Federal Student Financial Aid Handbook, Chapters 6 and 10, for complete information on loan counseling requirements. Compare ENTRANCE COUNSELING (FOR A STUDENT BORROWER). EXIT INTERVIEW (FOR A COMPLIANCE AUDIT) A closing meeting, following completion of a financial aid audit, between an auditor and administrative officials of the school involved in the audit. General audit findings and conclusions that will be included in the audit report are discussed. A similar interview is conducted by a federal official after conducting a program review. See AUDIT. Compare ENTRANCE INTERVIEW (FOR A COMPLIANCE AUDIT). EXPECTED FAMILY CONTRIBUTION (EFC) The figure that indicates how much of a family's financial resources should be available to help pay a student's postsecondary education expenses. This figure, determined according to a statutory defined method known as Need Analysis, is used for all students in determining eligibility for most federal Title IV student financial aid. FAFSA (FREE APPLICATION FOR FEDERAL STUDENT AID) This ED input document is the foundation for all need analysis computations. The application form is completed by the student and family. It gathers data to calculate the Expected Family Contribution (EFC). See NEED ANALYSIS and EXPECTED FAMILY CONTRIBUTION (EFC). FEDERAL AUDIT A financial audit conducted by an office or officer of a federal agency, such as a representative from ED's Office of Inspector General. FEDERAL CAPITAL CONTRIBUTION (FCC) The portion of a school's Federal Perkins Loan fund allocated to an institution by the federal government for a specific award year. Compare INSTITUTIONAL CAPITAL CONTRIBUTION (ICC). FEDERAL CASH TRANSACTIONS REPORT: STATUS OF FEDERAL CASH The quarterly or monthly financial report institutions use to report expenditure of funds received from ED. (Direct Loan schools do not use this report.) It is known as the ED/PMS 272 Report, the MEERS report, or the ED/PMS 272 Federal Cash Report. See DEPARTMENT OF EDUCATION PAYMENT MANAGEMENT SYSTEM (ED/PMS), MONTHLY ELECTRONIC EXPENDITURE REPORTING SYSTEM (MEERS), and QUARTERLY REPORT. FEDERAL DIRECT CONSOLIDATION LOAN A loan is arranged through ED's Direct Loan Servicing Center. The loan is designed to combine Title IV education loans (including non-Direct loans) into a single loan with one monthly repayment. Borrowers may also consolidate certain student loans from the U. S. Department of Health and Human Services. If borrowers consolidate defaulted loans, a new payment schedule is established. Compare CONSOLIDATION LOAN. FEDERAL DIRECT LOAN PROGRAM (WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM) A federal program where the U.S. government provides four types of education loans to student and parent borrowers: - the Federal Direct Stafford/Ford Loan, - the Federal Direct Unsubsidized Stafford/Ford Loan, - the Federal Direct PLUS Loan, and - the Federal Direct Consolidation Loan. These are also referred to collectively as Direct Loans. See individual loan names. FEDERAL DIRECT PLUS LOAN Parents may borrow from this education loan program on behalf of their dependent children. As one of the Direct Loans, PLUS loans are made directly by the federal government through students' schools. Compare FEDERAL PLUS LOAN. FEDERAL DIRECT STAFFORD/FORD LOAN (SUBSIDIZED) On the basis of student financial need, this loan program provides federally financed low-interest loans to students who are in undergraduate, graduate, or professional programs. During in- school, grace, and deferment periods, such as when a borrower is in school, the federal government does not charge interest on the loan. See FEDERAL DIRECT UNSUBSIDIZED STAFFORD/FORD LOAN. Compare FEDERAL STAFFORD LOAN (SUBSIDIZED). FEDERAL DIRECT UNSUBSIDIZED STAFFORD/FORD LOAN This loan program provides federally financed, low-interest loans to students who are in undergraduate, graduate, or professional programs. These loans are not based on financial need and are not government subsidized. The borrower may pay the interest charges on the loan on a quarterly basis during in-school, grace, or deferment periods, or may allow the interest to accumulate and be capitalized when repayment begins. See CAPITALIZING INTEREST and FEDERAL DIRECT STAFFORD/FORD LOAN (SUBSIDIZED). Compare UNSUBSIDIZED FEDERAL STAFFORD LOAN. FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM Formerly called the Guaranteed Student Loan (GSL) Program, this group of federal education loans was renamed the Federal Family Education Loan (FFEL) Program as part of the 1992 reauthorization of the Higher Education Act (HEA). The FFEL Program is made up of Federal Stafford Loans (both subsidized and unsubsidized), Federal PLUS (parent) Loans, and Federal Consolidation Loans. All of these are long-term loans insured by state or private nonprofit guaranty agencies that are reimbursed by the federal government for all or part of the insurance claims paid to lenders. This guaranty replaces the collateral or security usually required with long-term consumer loans. The Federal Supplemental Loans for Students (SLS) Program, which was once part of the FFEL Program, was eliminated by legislation, effective July 1, 1994. See individual loan names. FEDERAL PELL GRANT PAYMENT AND DISBURSEMENT SCHEDULES Charts published annually by the U.S. Secretary of Education that determine the dollar value of student Federal Pell Grant awards on the basis of schools' costs of attendance (COAs) and students' Expected Family Contributions (EFCs). FEDERAL PELL GRANT PROGRAM A grant program for undergraduate students who have not completed a first baccalaureate degree. It is designed to financially assist students with need who are the least able to contribute toward their basic education expenses. If students apply, meet all the eligibility criteria, and are enrolled in an eligible program at an eligible institution, they will receive Federal Pell Grants. Formerly, this grant was called the Basic Educational Opportunity Grant (BEOG). In 1982, it was renamed to honor Senator Claiborne Pell; later the word "Federal" was added to its name. FEDERAL PERKINS LOAN (FPL) PROGRAM This campus- based loan program provides low-interest student loans to undergraduate and graduate students with financial need. Formerly, it was called the National Direct Student Loan (NDSL) Program and the National Defense Student Loan Program. In 1987, it was renamed to honor Congressman Carl D. Perkins; later the word "Federal" was added to its name. See CAMPUS-BASED PROGRAMS. FEDERAL PLUS LOAN Parents may borrow from this education loan program on behalf of their dependent children. Loans are made by lenders such as banks, credit unions, or savings and loan associations. Compare FEDERAL DIRECT PLUS LOAN. FEDERAL REGISTER The government publication, published each weekday (except federal holidays), that prints regulations, regulatory amendments, notices, and proposed regulatory changes for all federal executive agencies. ED sends reprints of excerpts from the Federal Register that pertain to federal student financial aid to all institutions participating in Title IV programs. FEDERAL STAFFORD LOAN (SUBSIDIZED) A loan program providing federally subsidized, low-interest loans to students in undergraduate, graduate, or professional programs. Subsidized loans are awarded on the basis of student financial need. The loan formerly was part of the Guaranteed Student Loan (GSL) Program. In 1987, it was renamed to honor Senator Robert T. Stafford; in 1992, the word "Federal" was added to its name. See UNSUBSIDIZED FEDERAL STAFFORD LOAN PROGRAM. Compare FEDERAL DIRECT STAFFORD/FORD LOAN (SUBSIDIZED). FEDERAL STUDENT FINANCIAL AID HANDBOOK An ED publication that explains procedures schools should follow in administering federal student financial aid (SFA) programs. Some of these procedures are required by laws and regulations, while other procedures are necessary for the various reporting systems of each Title IV program. FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG) PROGRAM A campus-based aid program that provides grant assistance to students with financial need who are in undergraduate programs and have not earned a bachelor's degree or first professional degree. Priority in awarding Federal Supplemental Educational Opportunity Grant (FSEOG) funds is given to students who have exceptional financial need and are Federal Pell Grant recipients. See CAMPUS-BASED PROGRAMS. FEDERAL WORK-STUDY (FWS) PROGRAM A campus-based, federally funded employment program that provides paid jobs for undergraduate or graduate students who need such earnings to meet a portion of their education expenses. Formerly, it was called the College Work-Study Program. See CAMPUS-BASED PROGRAMS. FEDWIRE This system provides for the electronic transfer of funds (EFT) through the Federal Reserve Communications System (FRCS). This system differs from ACH in that funds are deposited the day the payment is sent through the FRCS directly into a school's deposit account. Financial institutions charge for this type of funds transfer. (There is no charge to a school for ACH transfer.) The Treasury Department's Financial Communications System (TFCS) Deposit Message Retrieval System (DMRS) uses FEDWIRE for returning funds to ED, including: - a liability or combination of liabilities totaling $100,000 or more for a prior award year (except for some Federal Perkins Loan liabilities); - excess cash in, or liquidation of, the Federal Perkins Loan fund; AND - ED-proposed or assessed fines of $100,000 or more. See AUTOMATED FEDWIRE SYSTEM. Compare AUTOMATED CLEARINGHOUSE (ACH). FINAL REGULATIONS Federal government operating rules published in the Federal Register. Final regulations, which have the force of law, usually take effect 45 days after the date they are published. However, there are exceptions to the 45-day period because of the Master Calendar of the Higher Education Act (HEA). The master calendar gives specific dates by which federal forms are to be developed and distributed, as well as dates campus-based program funds will be allocated and Federal Pell Grant funds will be authorized for an award year. SEE FEDERAL REGISTER and NOTICE OF PROPOSED RULEMAKING (NPRM). FINANCIAL AID TRANSCRIPT (FAT) A document used by institutions to collect data about Title IV aid and other financial aid received by a student at other educational institutions. Institutions must provide completed financial aid transcripts (FATs) at no charge to students and former students. FINANCIAL NEED The difference between the student's cost of attendance (COA) at a specific institution and what the student's family is able to pay--the Expected Family Contribution (EFC). See COST OF ATTENDANCE (COA) and EXPECTED FAMILY CONTRIBUTION (EFC). FINANCIAL RESPONSIBILITY An institution must show that is has the financial responsibility to participate in federal Title IV student aid programs. Financial responsibility covers general standards as well as exceptions institutions can meet as alternatives. The standards include those for for-profit, nonprofit, and public institutions and cover the past performance of an institution or persons affiliated with an institution. For further information, refer to Section 668.15 of the Student Assistance General Provisions Federal Register, April 29, 1994 or Chapter Two of The Blue Book. FINANCIAL STATEMENT A report prepared at the end of a school's fiscal year that provides an overview of the institution's financial activities for that fiscal year. Financial statements are audited by a Certified Public Accountant (C.P.A.) and submitted to the U.S. Department of Education in accordance with applicable regulations. FISCAL OPERATIONS Activities related to managing and completing financial transactions. Funds management, including student accounts, is the primary responsibility of an institution's business office. FISAP (FISCAL OPERATIONS REPORT AND APPLICATION TO PARTICIPATE) See CAMPUS-BASED PROGRAMS and ELECTRONIC FISAP. FLOPPY DISK DATA EXCHANGE (FDDE) An automated system by which institutions can submit Federal Pell Grant payment data on IBM-compatible computer diskettes to ED. ED provides a database management system to each FDDE participant. ED will return payment data on diskette. FORBEARANCE (ON A LOAN) When an FFEL lender (or the U.S. Department of Education for Direct Loans) allows a TEMPORARY cessation of payments or reduction of payment amounts for subsidized or unsubsidized Federal Stafford, Federal PLUS, Federal Perkins, or Federal Direct Loans. In doing so, it allows an extended period for making payments or accepts smaller payments than were previously scheduled. Forbearance may be given for circumstances that are not covered by deferment. Interest expenses continue to accrue during forbearance. Forbearance is an option of the FFEL lender or ED. However, there are a few circumstances where forbearance is mandatory with FFEL borrowers. See CFR 682.211(i) and CFR 682.211(j). Compare DEFERMENT (OF A LOAN). FORM PMS 270 See Payment Reimbursement Method. FREE APPLICATION FOR FEDERAL STUDENT AID See FAFSA. FUND A self-balancing group of accounts that consists of: - assets, - liabilities, - revenues, - expenses, AND - fund balance. Funds separated in an institution's books are limited to specific uses and are accounted for using a double entry bookkeeping system. GENERAL ELECTRONIC SUPPORT (GES) The Department of Education's electronic data transmission network. GIFT AID Financial aid that a student is not required to repay or earn through employment. Generally, gift aid is in the form of a grant or scholarship. Compare SELF-HELP AID. GRACE PERIOD The time period that begins the day after a loan recipient ceases to be enrolled at least half time and ends the day before the loan repayment period starts. GRANT (PROGRAMS) Gift aid programs that require neither repayment nor a work obligation from students. Federal Title IV grant programs are the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), and State Student Incentive Grant (SSIG). See individual grant program names. GUARANTY AGENCY A state agency or private, nonprofit institution or organization that administers the financial aid programs within the Federal Family Education Loan (FFEL) Program. One major function is to insure Federal Family Education Loans. Guaranty agencies are reimbursed by the federal government for all or part of insurance claims they pay to lenders. HIGHER EDUCATION ACT (HEA) OF 1965, AS AMENDED Landmark national higher education passed by Congress and signed by President Lyndon B. Johnson in 1965, as well as subsequent amendments and reauthorizing (extending) legislation of the statute. Title IV of the HEA authorizes the majority of the nation's federal postsecondary student financial aid programs and mandates that they be regulated and administered by the U.S. Secretary of Education. The HEA is effective for approximately five years, requiring Congress to reauthorize it every five years or so or to extend the legislation for up to one additional year. The most recent reauthorization was in 1992. The statute's most current version, as amended, always stands as the official version of the law. See REAUTHORIZATION and TITLE IV STUDENT FINANCIAL AID. HIGHER EDUCATION AMENDMENTS OF 1992 Congressional amendments and changes to the Higher Education Act (HEA) of 1965, as amended, put in place during the 1992 reauthorization of the HEA. They became federal law on July 23, 1992 when President George Bush signed the bill. Sometimes referred to as "the 1992 Amendments" or "the Amendments" in second and multiple-use references. HIGHER EDUCATION TECHNICAL AMENDMENTS OF 1993 Technical (nonsubstantive) corrections and additions to the 1992 reauthorization of the Higher Education Act (HEA) made in 1993. IMMEDIATE NEED A school requests funds to meet its "immediate need" for disbursing Federal Pell Grant Program, Federal Direct Loan Program, and campus-based program awards. "Immediate need" is defined as the amount of funds a school needs to make disbursements to students within the next three days. Recipients request funds as needed, for example, every three days, once a week, or whatever is appropriate. (NOTE: Immediate need does not authorize an institution to maintain a federally funded cash- on-hand balance.) See AUTOMATED CLEARINGHOUSE (ACH) and AUTOMATED FEDWIRE. INCARCERATED STUDENT A student who is serving a criminal sentence in a federal, state, or local correctional facility. A student in a less formal arrangement, such as a halfway house, home detention, or sentenced to serve only weekends, is not considered to be incarcerated. Students incarcerated in federal or state correctional facilities are not eligible to receive Title IV aid. INDEPENDENT AUDIT An institutional financial audit conducted by an independent public accountant (as defined by the audit standards of the U.S. General Accounting Office) who has been hired by the institution. Also called a nonfederal audit or compliance audit. See AUDIT and INDEPENDENT PUBLIC ACCOUNTANT (C.P.A.). INDEPENDENT PUBLIC ACCOUNTANT (C.P.A.) An accountant who is a Certified Public Accountant (C.P.A.) or state auditor, or an accountant who was licensed before December 31, 1970 who meets the audit independence standards of the U.S. General Accounting Office. See INDEPENDENT AUDIT. IN-HOUSE CONTROL DOCUMENTS Documents a school uses to meet federal recordkeeping requirements for federal financial aid programs, provide data needed for aid-related reports, and maintain a clear audit trail. INSTITUTIONAL CAPITAL CONTRIBUTION (ICC) The portion of a school's Federal Perkins Loan fund contributed by an institution. Beginning with the 1994-95 award year, new institutional capital contributions (ICCs) must be equal to at least one-third (33 1/3 percent) of the new federal capital contribution (FCC) amount or one quarter (25 percent) of the combined FCC PLUS ICC. Compare FEDERAL CAPITAL CONTRIBUTION (FCC) and PROGRAM PARTICIPATION AGREEMENT (PPA). INSTITUTIONAL LIABILITY Financial penalties or repayments that an institution must pay to ED as a result of incorrect institutional action or actions. A liability is the difference between the actual expenditures reported by the institution on its quarterly report (ED/PMS 272) for an Obligation Document Number for the award year and the final allowable expenditures as determined by the auditor, program reviewer, or hearing official. See Quarterly Report. INSTITUTIONAL PARTICIPATION DIVISION (IPD) A division in ED responsible for determining the eligibility of educational institutions to participate in federal student financial aid programs under Title IV. INSTITUTIONAL QUALITY ASSURANCE PROGRAM (IQAP) An ED quality-control program with an oversight strategy that focuses on results. Within established parameters, schools designated as Institutional Quality Assurance Program (IQAP) participants develop their own procedures for achieving award accuracy, measuring the effectiveness of their systems, and designing and targeting corrective actions through continuous improvement efforts. INSTITUTIONAL STUDENT INFORMATION RECORD (ISIR) The Institutional Student Information Record (ISIR) is generated by ED's Central Processing System (CPS) and is available to schools through the Electronic Data Exchange (EDE) in the form of Full Data Tapes, Full Data Magnetic Disks, or Full Data Paper Rosters. The ISIR includes full applicant data, information on reject reasons, comments, and assumptions. See STUDENT AID REPORT (SAR). INTEREST BENEFITS The interest (benefit) payments made by ED to a Federal Stafford Loan lender on behalf of a student. These payments are made by ED at the student's subsidized Federal Stafford Loan interest rate, but only during certain periods: the student's enrollment (at least half time), the grace period, or any authorized deferment period. Interest benefits are not paid on unsubsidized Federal Stafford Loans. See SPECIAL ALLOWANCE. JOB LOCATION AND DEVELOPMENT (JLD) PROGRAM Under the Job Location and Development (JLD) Program, an institution can use up to 10 percent or $50,000 (whichever is less) of its annual Federal Work-Study (FWS) Program allocation to expand off-campus job opportunities, including community-service jobs (CS/JLD), for its currently enrolled students. Jobs may be in either profit or nonprofit settings. Students in this program do not have to meet FWS criteria, show financial need, or meet other Title IV student eligibility criteria. See FEDERAL WORK-STUDY (FWS) PROGRAM. JOURNAL A bookkeeping method of original entry, providing a chronological record of the debit and credit elements of each transaction. As transactions occur, they are entered initially into the journal. At frequent intervals, such as daily, weekly, or at least monthly, the debits and credits recorded in the journal are transferred (posted) to the individual accounts in a ledger. See LEDGER. LEDGER A book of accounts in which each item of a monetary nature to be included in reports is assigned an account. Posting from a journal to the ledger results in each account having either a debit or credit balance that is shown on a particular report listing. Separate ledgers should be maintained for each program or fund. See JOURNAL. LEVEL OF EXPENDITURE (LOE) The total amount of Federal Perkins Loan funds a school is allowed to use to make loans to students and to pay administrative and collection costs in a given award year. A school's LOE is calculated by ED on the basis of funds available from a school's collection of outstanding Federal Perkins Loans, the amount of Federal Capital Contribution the school receives, and the amount of Institutional Capital Contribution the school provides. LIMITATION, SUSPENSION, OR TERMINATION (LS&T) Actions undertaken by ED against a postsecondary institution that has either: - violated governing the laws or regulations Title IV or Title VII student financial aid programs or the Program Participation Agreement or any other agreement made under the law or regulations; or - substantially violated the nature of its educational program, its financial charges, or the employability of its graduates. These ED actions against the institution may include proceedings on limitation, suspension, or termination (LS&T) of the school's participation in federal student financial aid programs; the assessment of fines up to $25,000 for each statutory or regulatory violation; and/or the implementation of emergency action. A LIMITATION means the postsecondary institution agrees to abide by certain specific restrictions or conditions in its administration of student financial aid programs, so that it can continue to participate in any of those programs. A limitation lasts for at least 12 months and, if a postsecondary institution fails to abide by the limitation's conditions, termination proceedings may be initiated. A SUSPENSION removes an institution from participating in Title IV and Title VII student financial aid programs for a period not to exceed 60 days, unless a limitation proceeding has begun. Suspension actions are used when a postsecondary institution can be expected to correct a program violation in a short time. A TERMINATION ends a postsecondary institution's participation in Title IV and Title VII programs. A TERMINATED INSTITUTION can be reinstated at a later date by ED to participate in Title IV and Title VII programs. However, at least three (3) months must elapse from the school's suspension and at least eighteen (18) months must elapse from the school's limitation or termination before an institution can request reinstatement. The request must be in writing. SEE EMERGENCY ACTION and PROGRAM PARTICIPATION AGREEMENT (PPA). LOAN An advance of funds guaranteed by a signed promissory note in which the recipient of the funds promises to repay a specified amount(s) under prescribed conditions. LOAN DISCLOSURE STATEMENT A statement sent to a loan borrower by the lender before or at the time it disburses a loan, as well as before the start of the repayment period. The purpose of the disclosure is to provide the borrower with thorough and accurate information about the loan terms and the consequences of default. It includes information such as: - amount of the loan, - interest rate, - fee charges, - length of the grace period (if any), - the maximum length of the repayment, AND - the minimum annual repayment, deferment conditions, and the definition of default. MASTER CALENDAR To assure adequate notification about and timely delivery of Title IV financial aid, ED operates using a master calendar defined in the Higher Education Act (HEA). This calendar gives specific dates by which federal forms will be developed and distributed, as well as dates campus-based funds will be allocated and Federal Pell Grant funds will be authorized for an award year. The master calendar determines by what dates federal financial aid regulations must be published. MONTHLY ELECTRONIC EXPENDITURE REPORTING SYSTEM (MEERS) This new system enables ED/PMS, recipients, including schools, to report expenditures electronically through the service bureau to ED/PMS each month. The software needed to report expenditures is provided to recipients by ED and technical assistance is provided to recipients by both the service bureau and ED. MEERS recipients download a file from the service bureau, update their expenditures, and transmit the file back to the service bureau between the 10th and 25th of each month. MEERS reporting also includes financial aid reporting for programs other than Title IV, such as discretionary grants and Title III. Schools also retrieve data from ED/PMS via MEERS. NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS) An ED database that collects and maintains student loan information from guaranty agencies, lenders, institutions, ED's Direct Loan Servicing Center, and ED's Title IV defaulter file. Information on all students who previously borrowed under Title IV programs also is maintained in the database. The database is updated on a weekly or monthly basis using information provided from the just-cited sources. NATIONALLY RECOGNIZED ACCREDITING AGENCY OR ASSOCIATION An independent organization that monitors schools' practices and that certifies or approves schools to operate and/or offer certain programs of study. These organizations must be approved by the U.S. Secretary of Education for schools participating in the Title IV programs. See SITE VISIT. NEED ANALYSIS The statutory defined method for determining Expected Family Contributions (EFCs) for all students applying for federal Title IV student financial aid. See COST OF ATTENDANCE (COA) and EXPECTED FAMILY CONTRIBUTION (EFC). NONFEDERAL AUDIT See AUDIT and INDEPENDENT AUDIT. NONFEDERAL SHARE The portion of campus-based program funds that a school must contribute from a nonfederal source (usually the portion comes from the school itself). In 1995-96, for Title IV campus-based programs, a nonfederal source must contribute amounts equal to at least one-third (33 1/3 percent) of the federal contribution to the Federal Perkins Loan Fund; one-quarter (25 percent) of Federal Work-Study (FWS) awards; and one-quarter (25 percent) of Federal Supplemental Educational Opportunity Grant (FSEOG) awards. These nonfederal funds were formerly referred to as the institution's matching share. NOTICE OF PROPOSED RULEMAKING (NPRM) Notice printed in the Federal Register of proposed regulations from a government agency, such as ED. Publication of a notice of proposed rulemaking (NPRM) begins an official comment period (which is usually 45 days or 60 days long, but may range from 30 days to 120 days in length) during which interested parties are invited to submit comments about the proposed regulations. See FEDERAL REGISTER and FINAL REGULATIONS. OFFICIAL NOTICE OF FUNDING A computer-generated letter a school receives from ED that lists final allocation amounts for each federal campus-based financial aid program a school administers. The notice, which must be sent by April 1, notifies the school of the allocation amounts it will receive for the upcoming award year, which begins the following July 1. OPERATOR-ASSISTED MODE One of the two modes schools and other ED/PMS recipients use to request funds from ED/PMS under ACH. As the name implies, recipients speak directly to an operator to request funds. Compare AUTOMATED VOICE RESPONSE (AVR). OVERPAYMENT Any financial aid amount paid to a student in excess of the amount the student is eligible to receive. This situation may arise due to a student's change in enrollment status, withdrawal, or change in financial situation. Except for Federal Work-Study funds, the student would be required to repay excess funds received unless adjustments could be made to the student's aid during subsequent payment periods within the same award year. See REPAYMENT. PACKAGING The process of assembling one or more financial aid awards of loans, grants and/or scholarships, and employ-ment for a student; also referred to as award packaging. PAYMENT PERIOD A school-defined length of time for which financial aid funds are paid to a student. For programs using academic terms, a payment period is equal to a term. For programs not using academic terms, schools must designate at least two payment periods within an academic year, pursuant to all applicable regulations. In the Federal Family Education Loan (FFEL) Program, and campus-based programs, a payment period is the time between the beginning and midpoint and end of the academic year or non- traditional program calendar. The Federal Pell Grant Program payment period is defined in 34 CFR 690.3 of the Federal Pell Grant regulations. The concept of a payment period is not used in the Federal Direct Loan Program. Compare ENROLLMENT PERIOD. PAYMENT REIMBURSEMENT METHOD A method certain schools must use to request federal financial aid funds from ED. Rather than drawing down Title IV funds BEFORE disbursing them to students, a school submits Form PMS 270, "Request for Advance or Reimbursement," to ED to be reimbursed for the funds it has expended AFTER making aid disbursements to students. Payment is made by ACH/EFT. PEER EVALUATION An objective review of an institution's policies, procedures, and practices by a financial aid administrator from another school or by a consultant. Peer evaluations also allow first-hand observations and comparisons of how comparable institutions carry out financial aid responsibilities. PERIOD OF ENROLLMENT See ENROLLMENT PERIOD. PELL GRANT See FEDERAL PELL GRANT PROGRAM. PERKINS LOAN See FEDERAL PERKINS LOAN PROGRAM. PLUS LOAN See FEDERAL DIRECT PLUS LOAN and FEDERAL PLUS LOAN. POLICIES AND PROCEDURES MANUAL An in-house manual that helps an institution effectively and consistently manage financial aid using a compilation of written policies and procedures. Although ED does not require such a manual be used, it recommends that a school compile one, especially as federal financial aid regulations require schools to have and maintain certain written policies. POSTING Transferring the debits and credits from a journal to the proper control and subsidiary ledger accounts. Each amount recorded in the debit column of a journal is posted by entering it on the debit side of the appropriate ledger account, and each amount recorded in the credit column of the journal is posted by entering it on the credit side of the appropriate ledger account. PRINCIPAL AND INTEREST Principal is the loan amount borrowed. Interest is the amount the FFEL lender OR ED for Direct Loans OR the postsecondary institution for Perkins Loans charges a borrower for using the money. Interest rates are usually stated in annual percentages. A loan must be repaid; both principal and interest are included in the repayment made by the borrower to the lender OR ED OR the school. PRIOR YEAR RECOVERIES Funds a school recovers in a given award year from money disbursed in prior award years. Institutions must adjust award expenditures and administrative cost allowances (ACAs) in award years in which recoveries are made. See ADMINISTRATIVE COST ALLOWANCE (ACA). PROGRAM DETERMINATION LETTER (PDL) An official letter sent to a school by ED as a final result of an audit or program review. The letter outlines specific steps the school must take to reimburse ED for improperly spent funds, adjust both institutional and ED records and reports, and assure compliance with Title IV program regulations. PROGRAM PARTICIPATION AGREEMENT (PPA) A written agreement that must be signed by both a top official at an institution and the U.S. Secretary of Education that permits the institution to participate in one or more federal Title IV student aid programs (other than the State Student Incentive Grant [SSIG]). The signed agreement makes the institution's initial and continued eligibility to participate in Title IV programs conditional on compliance with all provisions of the applicable laws and program regulations. This agreement may have to be updated periodically due to changes at the institution. See EMERGENCY ACTION; INSTITUTIONAL ELIGIBILITY NOTICE; and LIMITATION SUSPENSION, OR TERMINATION (LS&T). PROGRAM REVIEW The process in which the management of one or more federal financial aid programs at an institution is reviewed by ED or a guaranty agency. A program review assesses the institution's compliance with federal laws and regulations and its own school policies. It may also include review of the institution's overall management and administrative capabilities. PROGRAM REVIEW EXCEPTIONS Institutional policies, procedures, or actions related to federal student financial aid programs cited in a program review report as being contrary to federal laws or regulations that govern the programs. Also referred to as "findings." PROMISSORY NOTE A contract between a lender and a borrower that contains the terms and conditions of the loan, including how the loan must be repaid. It becomes legally binding when signed (executed) by the borrower. QUARTERLY REPORT A financial aid report, known as the ED/PMS 272 Report or the ED/PMS 272 Federal Cash Transaction Report, sent from ED and completed by aid recipients, including schools, that reflects the expenditure of funds for each allocation received from ED. The report is sent at the end of each quarter during an award year. An institution completes designated portions of the report dealing with disbursements and recoveries for the Federal Pell Grant Program and campus-based programs and returns the report to ED. (NOTE: Failure to return the report to ED by the designated due date on the transmittal letter accompanying the report may result in suspension of funds to the recipient.) The ED/PMS 272 also includes financial reporting for programs other than the Pell Grant Program and campus-based programs, such as discretionary grants and Title III. SEE DEPARTMENT OF EDUCATION PAYMENT MANAGEMENT SYSTEM (ED/PMS) and INSTITUTIONAL LIABILITY. REAUTHORIZATION The process of continuing and changing current legislation, because the existing law has expired and has to be reenacted, conducted every five to seven years in the case of the Higher Education Act (HEA), whereby Congress reviews and then renews, terminates, or amends existing programs. (July 23, 1992 was the date the most recent HEA reauthorization was enacted.) See HIGHER EDUCATION ACT (HEA) OF 1965, AS AMENDED and TITLE IV STUDENT FINANCIAL AID. RECIPIENT DATA EXCHANGE (RDE) A computer-system procedure for transmitting Federal Pell Grant payment data between an institution and ED using machine-readable magnetic tape. RECONCILIATION OF CASH A confirmation that the cash amount shown in a school's accounting records agrees with the cash amount reported by the bank where it is deposited for the ED/PMS reporting period. Prompt and thorough cash reconciliation helps ensure the ongoing accuracy of a school's internal-control accounting system. RECONCILIATION OF FEDERAL FUNDS Balancing the school's records of federal funds received, expended, and returned against ED's records. A reconciliation should be performed monthly to ensure that reported expenditures, the trial balance, ED/PMS 272 Federal Cash Transactions Report for the Pell Grant Program and campus-based programs, ED's Student Payment Summary for the Pell Grant Program, the school's FISAP (Fiscal Operations Report and Application to Participate) for the campus-based programs, and any other allocation (other than Title IV student financial aid) are in agreement. There should also be a yearly reconciliation of the same items that should be included in the school's most recent audit. The reconciliation process is different in the Federal Direct Loan Programs (see Chapter 6 of The Blue Book). See also TRIAL BALANCE. REFUND This often refers to that portion of funds credited to a student's school account to cover institutional charges that the school returns to ED, a lender, or the student, if the student withdraws from, is expelled from, or drops out of school. If the student received any federal Title IV aid (other than Federal Work-Study), by law, a part of the refund must go to that Title IV program(s). "Refund" also can mean the return of interest or excess cash to ED from ED/PMS drawdowns or the return of audit and program review liabilities and fines. See LOAN ATTRIBUTION and TIMELY PROCESSING OF REFUNDS AND REPAYMENTS. REFUND POLICY A school policy that determines the conditions under which a student is entitled to a refund of payments made to the school on the student's behalf and the amount of that refund. All schools participating in Title IV programs are required to have a fair and equitable refund policy, as described in Section 668.22 of the Student Assistance General Provisions. A school's policy must provide a refund to Title IV recipients that is at least as much as the amount derived using (1) the requirements of applicable state law, (2) the refund requirements established by the school's nationally recognized accrediting agency and approved by ED, or (3) the statutory pro rata refund calculation defined by the 1992 reauthorization of the Higher Education Act. REJECTED (PELL PAYMENT DATA) A category of Federal Pell Grant processed payment data that contains unacceptable or incomplete information that is rejected by the Central Processing System (CPS). An institution must correct the records and resubmit them to the CPS. RENEWAL FAFSA A pre-printed application form to be updated by a current federal financial aid applicant to be eligible to receive Title IV financial aid for the upcoming (next) award year. To use this particular update form, the student must have submitted a FAFSA applying for (although not necessarily receiving or accepting) federal financial aid for the preceding award year. A renewal aid application is mailed directly to the student by the school or Central Processing System (CPS) to be completed and returned to the CPS. See FAFSA (FREE APPLICATION FOR FEDERAL STUDENT AID). REPAYMENT When a financial aid recipient who has received federal Title IV cash or EFT disbursement(s) withdraws from school, the school must determine whether the student owes a repayment to the federal government. If the cash disbursement (excluding Federal Work-Study [FWS], FFEL Program Loans, and Federal Direct Loans) was greater than the amount of the student's expenses before the student withdrew from school, the difference is considered an overpayment that must be repaid. A portion of the overpayment must be collected from the student and returned to federal Title IV programs as outlined in the federal repayment distribution formula. See DISTRIBUTION FORMULA, OVERPAYMENT, and TIMELY PROCESSING OF REFUNDS AND REPAYMENTS. REPAYMENT POLICY The institutionally established policy that determines the amount of education-related expenses (non- institutional costs) reasonably incurred during a student's actual period of attendance. See DISTRIBUTION FORMULA, OVERPAYMENT, and REPAYMENT. REPAYMENT SCHEDULE A SPECIFIC TIMETABLE, using the borrower's repayment plan as its basis, that details the amount of loan principal and interest due in each repayment installment and the number of payments that will be required to pay off the loan in full. Additionally, a repayment schedule traditionally lists the loan's interest rate, the due date of the first loan payment, and the frequency of loan payments. SATISFACTORY ACADEMIC PROGRESS (SAP) A satisfactory rate of student course-completion determined using qualitative and quantitative measures. By law, schools whose students receive Title IV funds must create policies for monitoring satisfactory academic progress (SAP). Schools must check at least once a year and document for each payment period that their Title IV aid students are making satisfactory academic progress. SELF-EVALUATION A school's regularly scheduled in-house evaluation of the way it administers its student financial aid program. A self-evaluation is undertaken in an effort to detect any problems early on and resolve them. SELF-HELP AID Student financial aid loan programs where funds must be repaid or employment-opportunity programs awarded to students. Compare GIFT AID. SEOG Term is obsolete. See FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG) PROGRAM. SEPARATION OF FUNCTIONS As a part of administering federal student financial aid programs, a school is required to establish and maintain a checks-and-balances internal-control system ensuring that no single school office can both authorize payments and disburse funds to students. Often, this required separation is created by dividing the functions between the school's financial aid office and the school's business office. SINGLE ENTRY BOOKKEEPING The system used, for example, in a personal checkbook where generally only records of cash and of personal accounts are maintained. Where transactions are infrequent and receivables, payables, and assets other than cash are few, carefully maintained single-entry records may be adequate. See BOOKKEEPING. SITE VISIT A visit to a school during which an independent auditor, nationally recognized accrediting agency, State Postsecondary Review Entity (SPRE), and/or ED seeks to understand the school's physical plant, enrollment, student financial aid application process, and methods of monitoring student attendance. See INDEPENDENT AUDIT, NATIONALLY RECOGNIZED ACCREDITING AGENCY OR ASSOCIATION, and STATE POST SECONDARY REVIEW ENTITY (SPRE). SKIP TRACING Traditionally, searching for someone with unpaid debts who has left hurriedly or secretly ("skipped") without leaving a forwarding address. In a federal financial aid context, this is when, for whatever reason, a loan borrower no longer lives at the address where the Direct Loan Servicing Center, or a lender or school is sending loan billing notices, and the Direct Loan Servicing Center, or lender or school must attempt to locate the borrower's correct address. In the search, the law allows the use of any information obtained from the borrower while the borrower was at the school (such as data taken from applications and files), as well as information gleaned from any school office (including the registrar's office and the alumni office). If the borrower still cannot be located using information from the school (or otherwise available to the lender), the lender or school must use ED's free skip-tracing service to try to locate the missing loan borrower. SPECIAL ALLOWANCE A percentage of the average unpaid principal balance paid to the lender of an FFEL Program loan by ED. In effect, ED pays extra interest on the loan to the lender in addition to the basis interest charged on subsidized and unsubsidized loans. This amount makes up the difference between the rates charged to FFEL Program borrowers and market interest rates. The amount of the special allowance is set by a statutory formula related to 91-day Treasury Bill rates. STAFFORD LOAN See FEDERAL DIRECT STAFFORD/FORD LOAN (SUBSIDIZED), FEDERAL DIRECT UNSUBSIDIZED STAFFORD/FORD LOAN, FEDERAL STAFFORD LOAN (SUBSIDIZED) and UNSUBSIDIZED FEDERAL STAFFORD LOAN. STATEMENT OF ACCOUNT (SOA) An official Federal Pell Grant statement from ED that sets a school's Pell authorization level for the upcoming award year and projects adjustments to the school's Pell funding needs. See FEDERAL PELL GRANT PROGRAM. STATE POSTSECONDARY REVIEW ENTITY (SPRE) A state agency approved by the U.S. Secretary of Education that determines eligibility for Title IV program participation in the state and ensures compliance with state standards. SPREs were created in the 1992 reauthorization of the Higher Education Act (HEA). However, Congress might not fund the SPREs. See STATE POSTSECONDARY REVIEW PROGRAM (SPRP). STATE POSTSECONDARY REVIEW PROGRAM (SPRP) A program created in the 1992 reauthorization of the Higher Education Act (HEA) that is designed to reduce fraud and abuse in federal financial aid programs. The State Postsecondary Review Program (SPRP) establishes state standards for schools participating in Title IV programs. A state identifies a State Postsecondary Review Entity (SPRE) (which must be approved by the U.S. Secretary of Education) to perform these functions. See STATE POSTSECONDARY REVIEW ENTITY (SPRE). STATE STUDENT INCENTIVE GRANT (SSIG) A Title IV gift- aid program jointly funded by the federal government and participating states. It provides state scholarship or grant assistance to students who show financial need. STUDENT AID MASTER RECORD An institutional record containing information for an in-school student for each award year. The institution records all basic information relating to all student aid programs, including institutional and other aid programs, on the master record. STUDENT AID REPORT (SAR) The report sent directly to a student from ED's Central Processing System (CPS) that summarizes information submitted on the student's Free Application for Federal Student Aid (FAFSA) and provides financial-need calculations (including the student's Expected Family Contribution [EFC]) on the basis of the submitted figures. As of the 1996-97 award year and thereafter, the SAR has two parts. Part 1 is the Student Information Summary. Part 2, the Information Review Form, is where the student can make any needed corrections or information changes. The student provides the corrections and returns Part 2 of the SAR to the CPS. The CPS will then send the student a copy of the corrected SAR. For the 1995-96 award year, the SAR has three parts. It has the same Parts 1 and 2 as the 1996-97 SAR and a Part 3, the paper Payment Voucher. See INSTITUTIONAL STUDENT INFORMATION RECORD (ISIR). STUDENT PAYMENT SUMMARY (SPS) A listing retained in ED's records of Federal Pell Grant recipients summarizing their award information. The summaries are sent to the appropriate institutions at least three times during the award year, as well as at the end of the year. STUDENT STATUS CONFIRMATION REPORT (SSCR) Reports (in either paper or electronic form) sent to educational institutions at least twice a year by guaranty agencies or the Direct Loan Servicing Center. The report lists all the Federal Stafford Loan and Federal Direct Loan borrowers at the institution who (a) have loans guaranteed by the agency or made by ED and (b) were last reported as enrolled at the school. The institution is required to provide the guaranty agency or Direct Loan Servicing Center with certain enrollment information about each of the borrowers. The Student Status Confirmation Report is used as a monitoring device to help determine when student borrowers must begin repaying their student loans. SUBSIDIARY ACCOUNTS Accounts related to the control account that support in detail the summary transactions posted in the control account. See CONTROL ACCOUNT. SUBSIDIARY RECORDS RECONCILIATION Institutional records that must exist to support the totals in each Title IV financial aid program account. Reconciliation between accounts and subsidiary record detail should be performed at least once a month, as required by some Title IV programs. SUPPLEMENTAL APPROPRIATION An additional allocation of available funds for one or more campus-based programs that may be given to a school on the basis of the school's need for additional funds. Supplemental allocations are made after schools have released unexpended campus-based funds at the end of an award year. See APPROPRIATION, ALLOCATION, and DEOBLIGATION. T-ACCOUNTS A short method accountants use to illustrate ledger accounts, alleviating the tedious reproduction of accounts as they actually appear in an institution's ledger. Accountants use the T- account as a worksheet to check the debit and credit balances of individual ledger accounts and to trace posting of transactions to the various ledger accounts. See CONTRA ACCOUNT. TIMELY PROCESSING OF REFUNDS AND REPAYMENTS Schools must notify students and loan lenders, in writing, when financial aid is refunded or repaid to Title IV programs. Schools must return refund or repayment portions to the Federal Direct Loan Program, the Federal Pell Grant Program, and campus-based program accounts within 30 days of a student's withdrawal date and, under the FFEL Program, return proceeds to the lender within 60 days of a withdrawal date. If an audit or program review reveals that a school is not meeting the deadlines for returning refunds and repayments to Title IV accounts, the school incurs a financial liability. See REFUND and REPAYMENT. TITLE IV STUDENT FINANCIAL AID Federal financial aid programs for students attending postsecondary educational institutions, authorized under Title IV of the Higher Education Act of 1965, as amended. The programs are administered by the U.S. Department of Education. Title IV programs consist of: - Federal Pell Grants, - Federal Supplemental Educational Opportunity Grants (FSEOGs), - Federal Work-Study (FWS), - Federal Perkins Loans, - Federal Family Education Loan (FFEL) Program loans, - Federal Consolidation Loans, - State Student Incentive Grants (SSIGs), - William D. Ford Federal Direct Loans, - Robert C. Byrd Honors Scholarships, AND - Presidential Access Scholarships (currently, these scholarships are unfunded). See HIGHER EDUCATION ACT (HEA) OF 1965, AS AMENDED. TRIAL BALANCE A comparison of debit and credit balances and the addition of account balances. A successful trial balance for the Title IV programs is a confirmation that accounts receivable, program expenditures, and cash balances equal the amounts authorized. The purpose of a trial balance is to check that the dollar amounts of debits and credits are equal in the general ledger accounts. This is a useful tool for catching many types of errors, but having a trial balance in balance, in and of itself, is not an assurance that other accounting errors haven't been made. Taking a trial balance should be performed at least monthly. See RECONCILIATION OF FEDERAL FUNDS. UNSUBSIDIZED FEDERAL STAFFORD LOAN A federal student loan program that provides low-interest loans to students in undergraduate, graduate, and professional programs. Unsubsidized loans are not awarded on the basis of financial need. Interest on an unsubsidized loan is charged to the borrower throughout the life of the loan. See CAPITALIZING INTEREST and FEDERAL STAFFORD LOAN (SUBSIDIZED). Compare FEDERAL DIRECT UNSUBSIDIZED STAFFORD/FORD LOAN. U.S. TREASURY CHECK (SYSTEM) This funds-request system is no longer used because payments no longer are made by Treasury check. All payments through ED/PMS are made electronically through ACH/EFT or FEDWIRE. USER'S GUIDE A technical reference publication produced by ED and designed to support or assist recipients using electronic systems such as EDE, MEERS, and FEDWIRE. VERIFICATION The technical and administrative procedures for detecting and resolving inaccuracies in data a student (and family) supplied on the Free Application For Federal Student Aid (FAFSA) when applying for Title IV aid. ED publishes a Verification Guide each year that details verification guidelines and procedures. WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM See FEDERAL DIRECT LOAN PROGRAM. |