| AwardYear: 1996-1997 ChapterNumber: 5 ChapterTitle: Overpayments, Referrals, and Suspected Fraud Section: Overpayments PageNumber: This chapter discusses the rules and procedures for recovering funds from overpayment, the procedure for referring certain overpayment cases to ED, and the procedure for reporting suspected fraud and abuse. [[Overpayment discussion applies to Direct and Stafford Loans only if verification is not a factor]] Note that EXCEPT FOR THE DIRECT LOAN AND FEDERAL STAFFORD LOAN PROGRAMS, the overpayment procedures apply WHETHER OR NOT an application is being verified. For Direct Loans and Federal Stafford Loans, the overpayment procedures apply ONLY for applications NOT being verified. (You may not disburse Direct Loan funds or deliver Federal Stafford Loan proceeds to a student who has not completed the verification process.) The overpayment discussion has been included for these two programs simply as a convenience. OVERPAYMENTS The Federal Pell Grant, FSEOG, and Federal Perkins Loan Programs If you discover that an applicant received more than the amount for which he or she was eligible under the Federal Pell Grant, FSEOG,*12* or Federal Perkins Loan*12* programs, you should determine whether the overpayment resulted from a student error or a school error. Then, you should try to eliminate the overpayment by adjusting subsequent disbursements in the award year. If this is not possible and if the overpayment is a result of STUDENT error, you should attempt to have the student repay the overpayment amount. FEDERAL PELL GRANT, FSEOG, AND FEDERAL PERKINS OVERPAYMENT BY SCHOOL ERROR. The school is liable for overpayments that result from school error, as in the following examples: - The school made an INTERIM DISBURSEMENT before verification was complete. - The school had CONFLICTING DOCUMENTATION when the award was made, although you did not know it. For example, the bursar's office could have information of which you were not aware; nevertheless, your school had conflicting documentation and is responsible for any resulting overpayments. - The school made an INCORRECT HAND CALCULATION of a student's eligibility for aid. If the overpayment is the school's responsibility, you may continue to make Federal Pell Grant, FSEOG, and Federal Perkins Loan payments to the student if the overpayment can be resolved through one of the following options: - The student REPAYS the overpayment in full. - The student MAKES REPAYMENT ARRANGEMENTS satisfactory to your school - You can eliminate the overpayment by ADJUSTING subsequent disbursements. [[School must reimburse program account within 60 days if other recovery methods fail]] If you cannot recover the overpayment through these methods, you must reimburse the appropriate program account from your own funds within 60 days following the applicant's last day of enrollment OR by the last day of the award year, whichever comes first. FEDERAL PELL, FSEOG, AND FEDERAL PERKINS OVERPAYMENT BY STUDENT ERROR. If the overpayment occurred as a result of student error, you may continue to make Federal Pell Grant, FSEOG, or Federal Perkins Loan payments to the student if you can eliminate the overpayment by adjusting subsequent disbursements in the award year. If you cannot do this, you CANNOT make any further Federal Pell Grant, FSEOG, or Federal Perkins payments to the student until he or she completely repays the overpayment to your school or makes repayment arrangements satisfactory to your school. If the student will not agree to repay, you are not liable, but you must make a reasonable effort to contact the student and collect the repayment. If your reasonable effort fails, you may, in certain cases, refer the debt to ED (see page 63). The Federal Work Study (FWS) Program [[$300 tolerance also applies to Stafford or Direct Loans included with FWS in aid package]] A student employed under the FWS program may earn (from need- based employment) up to $300 in excess of his or her financial need before employment under the FWS program must be discontinued. Schools are not required to monitor income from non need-based employment in determining an FWS overaward. Note that if a Federal or Direct Stafford Loan is INCLUDED WITH FWS in a student's financial aid package, the $300 tolerance also applies to either loan. That is, as long as an overaward does not exceed $300, you do not have to adjust any Federal Stafford Loan or Direct Loan amounts. (This provision applies whether or not you have disbursed any portion of either type of loan.) Of course, the $300 tolerance applies only if the overaward occurs because additional resources became available after you packaged aid. [[Cannot require student to repay FWS wages earned, except in case of proven fraud]] If the student's FWS earnings have already exceeded his or her eligibility by more than the applicable limit, as explained above, and you cannot eliminate the overpayment by adjusting or canceling the student's other federal aid (other than Pell), you are required to reimburse the FWS program from the school's funds. (If the student also received FSEOG funds or other funds under institutional control, you may attempt to have the student repay the overpayment.) YOU CANNOT REQUIRE A STUDENT TO REPAY WAGES EARNED, EXCEPT IN THE CASE OF PROVEN STUDENT FRAUD. The Federal Direct Loan and Federal Stafford Loan Programs [[Procedures apply only if application is not being verified]] AS EXPLAINED IN CHAPTER 3, YOU MAY NOT DISBURSE DIRECT LOAN FUNDS OR DELIVER FEDERAL STAFFORD LOAN PROCEEDS TO A STUDENT WHO HAS NOT COMPLETED THE VERIFICATION PROCESS. The provisions discussed here are included ONLY to complete the overpayment discussion which, as has been mentioned, applies to the Federal Pell Grant, FSEOG, FWS, and Federal Perkins Loan programs whether or not an application is being verified. If you discover that a student's Federal Direct Loan exceeds the student's need, you must adjust the amount disbursed according to the procedures described in Chapter 6 of the Direct Loan School Guide. If a Federal Stafford Loan application was certified for an amount that exceeds the student's need, the steps you must take vary according to the loan's disposition. Remember that if a Direct Loan or Federal Stafford Loan is included with FWS in a student's financial aid package, a $300 tolerance applies to either loan. LOAN HAS BEEN CERTIFIED BUT SCHOOL HAS NOT RECEIVED FUNDS. You may have the lender cancel or reduce the loan. You also have the option of reducing or canceling aid over which your school has control. FUNDS RECEIVED BUT NONE DISBURSED. You have several choices in this situation: - You may attempt to reduce or eliminate the overaward by using the student's Federal PLUS Loan or unsubsidized Federal Stafford Loan to replace the family's EFC. However, you must repay subsidized and unsubsidized Federal Stafford Loan funds to the lender to eliminate the overaward BEFORE you may adjust or cancel a student's undisbursed campus-based aid. - You may deliver the first disbursement to the student if you can eliminate the overpayment by reducing or canceling subsequent loan disbursements. - If the student is ineligible for a portion of the first loan disbursement, you can return the check to the lender or escrow agent and request a new check for the correct amount, or you can disburse the proper amount to the student and refund the excess to the lender or agent. You must notify the lender or agent in writing of the reason for any returned funds. - If the student is ineligible for the ENTIRE loan, you must return the proceeds to the lender. You must notify the lender or agent in writing of the reason for any returned funds. FIRST DISBURSEMENT MADE, BUT ENTIRE LOAN PROCEEDS NOT RELEASED. If you have made the first disbursement, you must have the lender or agent reduce the second disbursement to eliminate the overpayment. (You must withhold and promptly return any proceeds not yet delivered, notifying the lender or agent in writing of the reason for the returned funds.) In rare cases, the first disbursement alone exceeds the student's need; in that case, you must attempt to eliminate the overpayment by adjusting student aid other than Federal Pell Grants. LOAN PROCEEDS DISBURSED IN FULL. If you have disbursed the ENTIRE loan to the student, the situation is not considered an overpayment, and no refund to the lender is required. |