Transcript Slide 1

National Association of Student
Financial Aid Administrators Presents…
Module 11
Cash Management
© NASFAA 2006
Cash Management Issues
• Effective cash management ensures:
– Students receive money when needed
– Title IV loan interest does not accrue needlessly
– Only eligible students receive Title IV funds
– Title IV overawards and overpayments are avoided
– Institutional fiscal needs are met
– No excess federal cash is held
– Accounting and audit trails are clear
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Cash Management
• Review of regulatory requirements for:
– Requesting Title IV funds
– Disbursing Title IV funds
– Maintaining Title IV funds
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© NASFAA 2006
Grants Administration and Payment
System
• Grants Administration and Payment
System (GAPS)
– Financial management system for Title IV
– Communicates with Common Origination
and Disbursement (COD) System
– Schools request funds on-line via ED’s
e-Payments Web site (part of e-Grants
Web site)
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Grants Administration and Payment
System
• Before using GAPS, school must register
with ED by:
– Obtaining Data Universal Numbering System
(DUNS) number
– Obtaining Grant Award Number
– Setting up bank information
– Obtaining unique User ID and password for
each authorized GAPS user
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Common Origination and Disbursement
• For Federal Pell Grants and Direct Loans,
COD is used to:
– Request funds
– Report disbursement and origination data
– Reconcile accounts
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Payment Methods
• Advance
• Just-in-time
• Reimbursement
• Cash monitoring
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Advance Payment Method
• Funds requested to meet immediate need
for:
– Federal Pell Grant disbursements
– Federal share of FSEOG, FWS, and
Federal Perkins Loans
– Net amount of Direct Loan
disbursements
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Advance Payment Method
• Federal Pell Grant authorization via
Electronic Statement of Account (ESOA)
– Summarizes Current Funding Level (CFL)
– Initial ESOA sent to school by June 1 and
subsequent ESOAs sent as CFL changes
– Initial ESOA is estimate of funds needed for first
disbursements, based on prior year
– CFL adjusted throughout the award year based
on actual disbursements accepted by COD
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Advance Payment Method
• Federal Pell Grant and Direct Loan funds
received via:
– Advanced Funded method; or
– Pushed Cash method
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Just-in-Time Payment Method
• Used for Federal Pell Grant payments at
certain schools
• ED provides funds to school at or near time
of disbursement using Pushed Cash
delivery method
• Exempt from certain cash management
requirements
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Reimbursement Payment Method
• ED monitors school’s use of funds
• School makes disbursements before
drawing down funds
• School submits documented request for
funds
• ED may place certain restrictions on
requests for FFEL disbursements or
certifications
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Cash Monitoring Payment Method
• Similar to reimbursement method
• 2 levels of Heightened Cash Monitoring
(HCM)
– HCM 1: School draws down funds or cash is
deposited in school’s bank account based on
modified ED review process
– HCM 2: School provides documentation and
funds are deposited in school’s bank account
after ED’s approval
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Crossover Period Drawdowns
• Federal Pell Grants: School generally
may choose to pay funds from either
award year using expected family
contribution (EFC) if for chosen award
year:
– Student has eligibility
– School has valid ISIR or SAR and
official EFC
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Crossover Period Drawdowns
• FSEOG and Federal Perkins Loans
– School’s choice to pay from either award
year, regardless of EFC used for Federal
Pell Grant
– Award year EFC may be different from
award year allocation from which funds
are paid
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Crossover Period Drawdowns
• Federal Work-Study
– Pay hours worked before 7/1 from prior
award year
– Pay hours worked on or after 7/1 from
upcoming award year
– Either award year EFC may be used for
enrolled student, but must match EFC used
for awarding other campus-based, FFEL, or
Direct Loan funds
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Crossover Period Drawdowns
• Direct Loans
– No authorization level
– May use either prior-year or upcoming
award year EFC
– If student is also receiving campus-based
funds, must use same EFC as for campusbased awards
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Excess Cash
• Except for Federal Pell Grant funds
received under just-in-time payment
method and Federal Perkins Loan
Program, funds remaining after
3 business days are “excess cash”
• Excess cash must be returned immediately
to program fund
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Excess Cash
• Need not return excess cash if it can be
eliminated by making disbursements within
next 7 calendar days and either excess
cash occurs:
– During a peak period and is less than 3% of
total prior-year drawdowns; or
– During a nonpeak period and is less than 1%
of total prior-year drawdowns
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Excess Cash
• 3-business-day rule for disbursing funds
satisfied on date school credits student’s
account, issues check to student or PLUS
borrower, or initiates EFT to student’s or
PLUS borrower’s bank account
• Check is considered “issued” when mailed
or when student or PLUS borrower is
notified of its availability
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Payment Periods
• Schools must disburse all Title IV funds
(except FWS) on payment period basis
– Additional rules apply to FFEL and Direct Loans
• Payment period based on academic
program structure:
– Term-based credit-hour
– Nonterm credit-hour
– Term or nonterm clock-hour
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Nonterm Credit-Hour Programs
• Example—program less than or equal to
academic year (AY)
– 16 credit-hour and 20-week program
– Payment period = 8 credit hours and
10 weeks
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Nonterm Credit-Hour Programs
• Example—program greater than AY
– 48 credit-hour and 60-week program;
AY = 24 credit hours and 30 weeks
– First AY payment periods = 12 credit
hours and 15 weeks each
– Second AY payment periods = 12 credit
hours and 15 weeks each
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Nonterm Credit-Hour Programs
• Example—program greater than AY;
remainder less than or equal to half an AY
– 34 credit-hour and 44-week program;
24 credit hour and 30-week AY
– First 2 payment periods = 24 credit hours and
30-weeks
– Final payment period = remaining 10 credits in
program
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Nonterm Credit-Hour Programs
• Example—40 credit-hour and 50-week
program; 24 credit-hour and 30-week AY
– First 2 payment periods: 12 credits and 15
weeks each
– Remainder of program: 16 credits (40 - 24) and
20 weeks (50 - 30)
– Final 2 payment periods: 8 credits and 10
weeks each
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Nonterm Credit-Hour Programs
• Other rules apply if:
– School does not award credits until student
completes academic year or program
– School exercises option of establishing more
than 2 payment periods
– Students who withdraw and re-enter nonterm
credit-hour programs
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Nonterm Credit-Hour Programs
• Re-entry example—48 credit-hour and 60week program; AY = 24 credit hours and 30
weeks
• Withdraws after 30 credits and 38 weeks
• Re-enters same program after 185 days
– Begins new payment period
– Remaining credits and weeks are less than AY,
but greater than half an AY
– Last 2 payment periods = 9 credits and 11
weeks each
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Clock-Hour Programs
• Example—program less than or equal to AY
– Program = 750 clock hours
– Payment periods are each 375 clock hours
• Example—program greater than AY
– Program = 1,800 hours; AY = 900 hours
– Four 450-hour payment periods
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Clock-Hour Programs
• Example—program greater than AY and
remaining portion is less than or equal to
half of AY
– Program = 1,200 hours; AY = 900 hours
– Payment periods = 450, 450, and 300 clock
hours
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Clock-Hour Programs
• Example—program greater than AY and
remaining portion is less than AY but greater
than half of AY
– Program = 1,500 clock hours; AY = 900 clock
hours
– First 2 payment periods = 900 clock hours each
– Last 2 payment periods = 300 clock hours each
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Disbursement Definition
• Title IV funds are considered disbursed on
date school credits student’s school
account or pays student or parent (if PLUS)
directly with:
– Funds received from ED;
– Funds received from FFEL lender; or
– Institutional funds (labeled as Title IV) used in
advance of receiving Title IV program funds
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Early Disbursements
• Federal Pell Grant, FSEOG, and Federal
Perkins Loan for standard term credit-hour
programs, earliest date:
– 10 calendar days before first day of
classes for term
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Early Disbursements
• Federal Pell Grant, FSEOG, and Federal
Perkins Loan for nonterm, nonstandard
term, and clock-hour programs, earliest
date is the later of:
– 10 days before first day of classes of payment
period; or
– Date student completed required clock or
credit hours and, if applicable, weeks of
instruction in previous payment period
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Late Disbursements
• Late disbursement permitted if:
– Student or parent (if PLUS) meets
conditions for a late disbursement
– Law or regulations do not prohibit the
late disbursement
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Late Disbursements
• Allowed if, before date student became
ineligible, CPS processed ISIR/SAR with
official EFC and:
– School originated Direct Loan
– School certified FFEL
– School awarded FSEOG or Federal Perkins
Loan
• ISIR or SAR with official EFC not required if
only aid is PLUS
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Late Disbursements
• School must make or offer to make late
disbursement if late disbursement
conditions are met
– Exception: School’s option to make late
FFEL or Direct Loan disbursement if
student dropped to less than half time
before completing loan period
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Late Disbursements
• May not pay late Federal Pell Grant
disbursement if student’s valid ISIR/SAR is not
received before annual deadline published in
Federal Register
• Late Federal Pell Grant disbursement may be
paid for all completed payment periods, but
amount is based on coursework completed
• Without ED approval, may not make late
disbursement later than 120 days after date
school determined student became ineligible
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Disbursement Methods
• Cash disbursement to student or to parent
borrower
• Disbursement to student via stored-value
card
• Check or similar means of releasing funds
(e.g., voucher)
• EFT to student’s or parent’s bank account
• Crediting student’s school account
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Allowable Current-Year Charges
• Title IV funds automatically may be applied
to tuition, fees, and institutionally-contracted
room and board without authorization
• Authorization required for other current
educationally-related charges
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Allowable Prior-Year Charges
• With student’s or parent’s (for PLUS)
authorization, may pay minor prior-year
charges if:
– Charges are less than $100; or
– Amount applied to prior-year charges will not
prevent student’s ability to pay current
educational expenses
• If Direct Loan funds, must credit current loan
period charges before prior period charges
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Nonallowable Charges
• If charges are outside realm of educational
purpose, Title IV funds must not be applied
• Examples:
– iPODs
– Vacations
– Automobiles
– Electronic entertainment equipment
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Disbursement Notifications
• Before disbursing Title IV funds, school must
notify student or parent (for PLUS) of:
– Date, amount, and method of each Title IV
disbursement
– Subsidized or unsubsidized loan amounts
– Amount authorized to earn under FWS
• Must notify dependent student and PLUS
borrower separately
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Disbursement Notifications
• Must notify borrower no earlier than 30
days before or within 30 days after
crediting Title IV loans to student’s school
account:
– Amount and date funds were credited
– Right to cancel all or portion of loan,
including procedures and deadline
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Disbursement Notifications
• If borrower notifies school to cancel all or
portion of the loan, school must do so if
request received by the later of:
– First day of payment period or period
covered by FFEL or Direct Loan, if school
sends notice more than 14 days before first
day of period; or
– Within 14 days after date school sent
notification
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Disbursement Notifications
• If borrower notifies school to cancel or
reduce loan amount after the deadline,
school may, but is not obligated to,
honor request
• School must inform student or parent
electronically or in writing of request’s
outcome
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Disbursement Authorizations
• Authorized services:
– EFT
– Disbursement to student’s school
account
– Holding excess funds
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Disbursement Authorizations
• Modification or cancellation effective on
date school receives notice from
student/parent
• May only credit charges incurred prior to
receipt of cancellation
• Must pay student/parent remaining held
funds within 14 days of date cancellation
is received
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General Student Eligibility Requirements
• Confirm that student still meets all Title IV
general student eligibility requirements
• Check that student is enrolled for classes
• If student never begins attending classes
or school cannot document student’s
attendance, all Title IV funds disbursed for
period must be returned
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Disbursement Requirements
• Federal Pell Grants
• FSEOG and Federal Perkins Loan funds
(common requirements)
• Federal Perkins Loans
• FWS wages
• FFEL and Direct Loans
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FFEL and Direct Loan Disbursements
• Generally disbursed in 2 or more equal
installments, none of which may be
more than half the loan amount
• Single disbursements allowed under
certain conditions
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FFEL and Direct Loan Disbursements
• If mini-sessions fall completely within time frame
of term, mini-sessions are considered part of
overarching term
• If mini-sessions are separate from other terms,
may:
– Combine mini-session with another term
– Combine individual mini-sessions into single
term; or
– Treat each as individual nonstandard term
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FFEL and Direct Loan Disbursements
• Delayed delivery/disbursement to firsttime, first-year undergraduate borrowers
– Unless exempt under low default rate
conditions, first disbursement not
permitted until 30 days after first day of
classes for student’s academic program
– For subsequent disbursements, student
is treated like any other borrower
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FFEL Disbursements
• Returning undelivered funds
– If school does not deliver loan funds
within applicable time frame, it must
return funds to lender no later than 10
business days after required
disbursement date
– Certain exceptions exist
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Title IV Credit Balances
• Title IV credit balance occurs any time the
total of Title IV funds credited to account
exceeds allowable charges
• Non-Title IV funds are not considered
when determining whether there is a Title
IV credit balance
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Title IV Credit Balances
• Handle Title IV credit balances:
– Student or parent borrower (for PLUS) may
authorize school to hold funds;
– Student or parent may authorize school to
apply funds to other current charges for
educationally-related activities or to minor
prior-year charges; or
– Otherwise, school must disburse funds to
student or parent
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Example: Eva (no authorization)
$3,000 Tuition, fees, institutionallycontracted room and board
(allowable charges)
– 4,000 Title IV aid (does not include PLUS)
– $1,000 Title IV credit balance
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Example: Eva (authorization provided)
$3,000 Tuition, fees, institutionallycontracted room and board
(allowable charges)
400 Books and supplies (charges
authorized by student)
– 4,000 Title IV aid (does not include PLUS)
– $ 600 Title IV credit balance
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Title IV Credit Balance
• Title IV credit balance must be paid within
14 days of later of:
– Date credit balance occurred
– First day of classes of applicable
payment period; or
– Date student (or parent, for PLUS)
rescinded authorization to hold funds
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Title IV Credit Balance: Example – Jane
• Total charges: $6,000 (tuition and fees).
• First day of classes: September 5
• Payments applied to allowable charges:
August 3:
August 10:
$1,000 Paid by student
$1,000 State grant
August 10:
August 26:
August 26:
August 27:
$2,000
$1,000
$ 600
$1,000
Institutional loan
Federal Pell Grant
Federal Perkins Loan
Private scholarship
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Title IV Credit Balance: Example – Tom
• Total charges: $2,000 (tuition and fees).
• First day of classes: August 25
• Payments applied to allowable charges:
August 6:
August 17:
August 17:
September 2:
September 7:
$1,000
$ 600
$ 300
$1,150
$ 700
Private scholarship
Federal Perkins Loan
FSEOG
Federal Pell Grant
Direct Loan
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Maintaining Title IV Funds
• May keep nonfederal and federal funds in same
account
• All schools must:
– Ensure account name includes “federal funds;” or
– Notify bank or investment company that account
contains federal funds
• All nonpublic institutions must also file UCC-1
with appropriate state or municipal government
entity if “federal funds” not part of account name
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Interest-Bearing Accounts
• May keep FFEL funds in interest-bearing
account
• Must keep Federal Perkins Loan funds in
interest-bearing or investment account
• Must keep other Title IV funds in interestbearing accounts if school does not meet
certain exceptions
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Interest Earnings Paid to ED
• Pay interest or investment revenue to ED at
least annually no later than June 30
• Exceptions:
– Federal Perkins Loan: Earned interest and
investment revenue must be made part of Fund
– FFEL: School may retain interest earned
– Other Title IV accounts: School may keep up to
total of $250 of interest or investment revenue
per year
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Administrative Cost Allowance
• Used to offset the cost of administering
the Federal Pell Grant and campus-based
programs
– Federal Pell Grant ACA of $5.00 per
recipient received via COD from ED
– Campus-based ACA calculated and
drawn down by school
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