ChapterTitle: Appendix A: Glossary
ACADEMIC YEAR (AY) A time period of at least 30 instructional
weeks in which a full-time undergraduate student is expected to
- 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
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
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
- communicating to the financial aid administrator all information
received by any school office that might affect a student's Title IV
- dividing the functions of authorizing payments and disbursing
- 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
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
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)
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
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
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
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
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
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
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
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)
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
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
CASH POOLING For institutions permitted to do so, depositing
federal funds for all of the Title IV aid programs in a single bank
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
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
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
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
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
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
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
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
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
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
- 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.
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
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
ELECTRONIC FUNDS TRANSFER (EFT) See AUTOMATED
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
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
- determines that the likelihood of loss to the federal government
outweighs putting in place limitation, suspension, or termination
- determines that immediate action is necessary to prevent misuse of
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
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
Number of clock hours per week
- For a program not using a semester, trimester, or quarter system:
Number of semester or trimester hours
per academic year
Number of quarter hours per academic year
Number of clock hours per week
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
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
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
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
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
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
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
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
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
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
- excess cash in, or liquidation of, the Federal Perkins Loan fund;
- ED-proposed or assessed fines of $100,000 or more.
See AUTOMATED FEDWIRE SYSTEM. Compare AUTOMATED
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
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
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
FISCAL OPERATIONS Activities related to managing and
completing financial transactions. Funds management, including
student accounts, is the primary responsibility of an institution's
FISAP (FISCAL OPERATIONS REPORT AND APPLICATION
TO PARTICIPATE) See CAMPUS-BASED PROGRAMS and
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
FUND A self-balancing group of accounts that consists of:
- 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
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
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
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
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)
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
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
LIMITATION, SUSPENSION, OR TERMINATION (LS&T)
Actions undertaken by ED against a postsecondary institution that
- 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
- 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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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.