Maintained for Historical Purposes

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

AwardYear: 1995-1996
ChapterNumber: 5
ChapterTitle: Overpayments, Referrals, and Suspected Fraud
Section: Overpayments
PageNumber:


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,*15* or Federal Perkins Loan*15* programs, you should
determine whether the overpayment was the result of 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 seek 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

- the school made an INCORRECT HAND CALCULATION of
a student's eligibility for aid

If the overpayment is the responsibility of the school, you may
continue to make Federal Pell Grant, FSEOG, and Federal
Perkins Loan payments to the student if he or she acknowledges
the overpayment in writing and agrees to repay it within six
months, or if the overpayment can be eliminated through
subsequent disbursements as described above.

If you cannot recover the overpayment through either of 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 as described on the previous page. If
you are unable to eliminate the overpayment, you CANNOT make
any further Federal Pell Grant, FSEOG, or Federal Perkins Loan
payments to the student until he or she completely repays the
overpayment to you. (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.)


The Federal Work Study (FWS) Program

The law has been amended to allow a student employed under the
FWS program to 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 no longer required
to monitor income from non-need-based employment in determining
an FWS overaward. However, because a $200 overaward limit is
still in effect for the FSEOG and Federal Perkins Loan programs, a
$300 FWS overaward limit is permitted ONLY when FWS is the
only campus-based aid awarded. If FWS is awarded in conjunction
with other campus-based aid, the $200 overaward limit is still in
effect for all the campus-based aid awarded to the student.

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
other federal aid (other than Pell) received by the student, 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
overpaid amount to those program funds.) 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

If you discover that a student's Federal Direct Loan or Federal
Stafford Loan application was certified for an amount in excess of
the student's need, the steps you are required to take vary according
to whether the entire loan amount has already been disbursed to the
student.

NO FUNDS DISBURSED. IF NO DISBURSEMENT HAS
BEEN MADE, YOU CAN EITHER RETURN THE CHECK to
the lender or escrow agent (within 45 days) and request that a
new check be issued in the appropriate amount, or you can
disburse the proper amount to the student and refund the excess to
the lender or agent.

FIRST DISBURSEMENT MADE, BUT ENTIRE LOAN
PROCEEDS HAVE NOT BEEN RELEASED. If the first
disbursement has already been made, you must instruct the lender
or agent to reduce the second disbursement and thereby eliminate
the overpayment. (You must withhold and promptly return any
proceeds not yet delivered.) In rare cases, the amount of the first
disbursement alone exceeds the student's reassessed need; in such
a situation, you must seek repayment from the student.

LOAN PROCEEDS DISBURSED IN FULL. If the entire loan
has already been disbursed to the student, you must notify both
the lender (or agent) and the student within 30 days of discovery.

Last Modified: 06/11/1998