Maintained for Historical Purposes

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

Until Verification Is Complete

AwardYear: 1998 - 1999
ChapterNumber: 3
ChapterTitle: Completing The Verification Process
Section: Until Verification Is Complete
PageNumber: 1

Withholding Payment

If a student’s application is selected for verification, he or she must complete the verification process or forfeit federal student aid eligibility. You have the authority to withhold disbursement of any federal student aid funds until the student completes the required verification. Such a policy ensures that a student’s application information and eligibility determination are absolutely correct before any funds are disbursed. Adopting this policy substantially reduces the incidence of overpayments.

Making Interim Disbursements

Making an interim disbursement before verification is completed is allowable, as long as you have no reason to believe the application information may be inaccurate. The limitations as they apply to each program are listed below. Be forewarned—you will be liable for an interim disbursement if verification reveals the student has received an overpayment, or if the student fails to complete verification.

The Federal Pell Grant, Federal Perkins Loan, and FSEOG Programs.
For the applicant’s first payment period, you may make one disbursement from each of these programs for which the applicant is eligible. If the applicant were eligible for aid from all three programs, for example, you could make three disbursements (one from each program), as long as they all fall within the applicant’s first payment period. Note that if you make an interim Pell disbursement, you must designate the “W” verification code (Without Documentation) when reporting the payment to ED. (See the Verification Status Codes section in this chapter.)

The Federal Work-Study (FWS) Program. Before completing verification, you may employ an applicant under FWS for up to 60 consecutive days after the applicant enrolled (or in summer employment for up to 60 days), provided you have no conflicting documentation on the applicant. After 60 days, if verification has not been completed, you must cease employing the student under FWS. If you later discover that an overaward exists, you should attempt to adjust the student’s other aid. Otherwise, you must reimburse the FWS Program from school funds. Except in the case of proven student fraud, a student may not be required to repay FWS wages earned. (See Chapter 4 of this guide, “Overpayments, Overawards, Referrals, and Suspected Fraud.”)

The Direct Loan and FFEL Programs. If you have no conflicting documentation on the student in question, you may originate a Direct Stafford/Ford (Subsidized) Loan or certify a Federal Stafford Loan application for a student who has not yet completed the required verification process. You may not, however, disburse a Direct Subsidized Loan or deliver Federal Stafford Loan proceeds to the borrower.7

Generally, you may not hold any Federal Stafford Loan proceeds received from a lender: (1) for more than 10 business days after receiving the funds via EFT and master check on or after July 1, 1997 but before July 1, 1999; (2) for more than 3 business days after receiving the funds via EFT and master check on or after July 1, 1999; and (3) for more than 30 days after receiving the funds if the lender provides those funds by a check payable to the borrower or copayable to the borrower and institution. If the applicant does not complete the required verification process within these time limits, you must return those loan proceeds to the lender. To handle excess Direct Subsidized Loan funds, schools must follow the procedures in the cash management regulations and in Chapters 6 and 7 of the Direct Loan School Guide .

If you originate a Direct Subsidized Loan or certify a Federal Stafford Loan application before verification is completed, you may later discover that the loan amount exceeds the student’s need. For Stafford Loans, you may request the lender to reduce or cancel the loan, and you also have the option of reducing or canceling aid over which the school has control. Direct Loan schools must adjust disbursements according to the procedures described in Chapter 6 of the Direct Loan School Guide.

Last Modified: 02/03/1999