nasfaa u authorized event: 2017–18 cash management - slide · pdf filenasfaa u...

2017-18AUTHORIZED EVENTS

CREDENTIALEDTRAINING

CASH MANAGEMENT

Slide Handout

© 2010–2017 by National Association of Student Financial Aid Administrators (NASFAA). All rights reserved. NASFAA has prepared this document for use only by personnel, licensees, and members. The information contained herein is protected by copyright. No part of this document may be reproduced, translated, or transmitted in any form or by any means, electronically or mechanically, without prior written permission from NASFAA. NASFAA SHALL NOT BE LIABLE FOR TECHNICAL OR EDITORIAL ERRORS OR OMISSIONS CONTAINED HEREIN; NOR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE FURNISHING, PERFORMANCE, OR USE OF THIS MATERIAL. This publication contains material related to the federal student aid programs under Title IV of the Higher Education Act and/or Title VII or Title VIII of the Public Health Service Act. While we believe that the information contained herein is accurate and factual, this publication has not been reviewed or approved by the U.S. Department of Education, the Department of Health and Human Services, or the Department of the Interior. The Free Application for Federal Student Aid (FAFSA®) is a registered trademark of the U.S. Department of Education. NASFAA reserves the right to revise this document and/or change product features or specifications without advance notice. April 2017

NASFAA U Authorized Event Cash Management

© 2017 NASFAA 1

Slide 1 © 2017 NASFAA

National Association of Student Financial Aid Administrators


Cash ManagementA NASFAA Authorized Event

2017–18


Lesson 1:Introduction to Cash Management


Effective Cash Management

• Rules and procedures related to managing Title IV funds

Request Maintain Disburse Use Return


© 2017 NASFAA 2


Eligible students only

Timely delivery

Cash flow

Avoid excess cash

Minimize interest accrual

Avoid overpayments

Appropriate accounting

Clear audit trail

Effective Cash Management

Slide 5 © 2017 NASFAASlide 5 © 2017 NASFAA

Measures of Administrative Capability


Administrative Capability

• Separation of functions– No single office may both

award and disburse aid– Must be organizationally

independent– May not be family

members– May not exercise

substantial control together


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Academic Year

Minimum Hours

Minimum Weeks in a

YearUndergraduate Program Type

Credit Hours 30 weeks

24 semester or trimester

Clock Hours 26 weeks 900 clock

36 quarter


Academic Year

Minimum Hours

Minimum Weeks in a

Year

Graduate/ Professional

Program Type

Credit Hours 30 weeks Defined by the school

Clock Hours 26 weeks Defined by the school


Payment Period

Standard & Nonstandard

(SE) TermNonstandard

(NSE)

Nonterm Clock-hour


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Payment Period

• Nonterm and clock-hour programs• For Direct Loans in nonstandard NSE

programs

Academic Year


Payment Period


programs

Academic Year

½ weeks of instruction

½ credit or clock hours


Payment Period


programs

First Payment Period



Second Payment Period


© 2017 NASFAA 5


Payment Period


programs

First Payment Period



Second Payment Period


Excused Absences from Clock-Hour Programs• School must have written policy• Excused absences in payment period

cannot exceed the lesser of:– Number allowed by accrediting agency– Number allowed by state licensing or

authorizing agency– 10% of clock hours in payment period


When Successful Completion of Hours Cannot Be Determined• Second payment period begins on later of

date student successfully completed half of either:– Coursework in AY, program or remainder of the

program– Weeks in AY, program or remainder of the

program


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Re-Entry Within 180 Days

• Withdrawn student who re-enters the same nonterm credit-hour or clock-hour program at the same school:– Remains in payment period– May receive funds returned and any undisbursed

funds• If re-entry in new award year, use funds from

award year during which payment period originally began


Transfer or Re-Entry After 180 Days

• Recalculate payment period for nonterm credit-hour program or clock-hour program if student withdraws and:– Transfers schools or into another program at

same school within any period; or– Re-enters same program at same school more

than 180 days after withdrawing• Exception made for certain transfers

between programs at the same school



© 2017 NASFAA 7


1. Do you agree with the purposes of cash management?

2. Given advances in technology, do you think the separation of functions is still necessary?

Page 12


3. Do you think it is appropriate that the academic year should have a minimum number of weeks of instructional time? Is this approach still appropriate given the popularity of innovative learning models, such as competency-based education?

4. Do you think it is necessary to have multiple definitions of a payment period?

Page 12


Lesson 2:Requesting and Managing Title IV Funds


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Requesting Title IV Funds

Depository Account:

A bank or investment account into which ED deposits all Title IV funds requested by the school.


Title IV Funds

Paym

ent M

etho

ds

Advance

Reimbursement

Heightened Cash Monitoring

G5 Payment System


Crossover Payment Period Drawdowns

Jan

10 -

May

15 Spring

Semester

May

20

-Aug

15 Summer

Crossover

Aug

20 -

Dec 2

0 Fall Semester


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Learning Activity: Crossover Payment Period Drawdowns

Page 29



Review the scenario described on page 29. Determine whether the funds for each Title IV program must be drawn down from 2016–17 or 2017–18 award year funds, whether the school has a choice of the award year from which it draws down funds, or whether the funds must be drawn down based on payment of the funds to the student before or after July 1.

Record your answers to the questions on page 29.

Page 29


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Learning Activity: Crossover Payment Period DrawdownsPeter is a dependent second-year student at Neverland University who is planning to be a secondary school teacher. Feeling the ticking of the clock, he decides to accelerate his studies. He enrolls in summer modules that cover the entire summer period between the 2016–17 and 2017–18 award years. The 2017 summer term begins on June 1, 2017 and ends on August 10, 2017.

For the summer term, he is awarded a Federal Pell Grant, a Direct Loan, and funds from each of the campus-based programs.

Page 29


Learning Activity: Crossover Payment Period DrawdownsNeverland is a standard semester-based school that combines all summer modules into a single term crossover payment period for purposes of awarding and disbursing Title IV federal student aid. Summer is a trailer to the previous academic year. For summer 2017, Neverland requires the 2016–17 FAFSA and uses the 2016–17 EFC to award Title IV aid.

Peter starts a Federal Work-Study job after the July 4th holiday and works the rest of the summer.

Page 29



Page 29


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Learning Activity: Crossover Payment Period DrawdownsIf Peter had chosen not to work during the summer between the 2016–17 and 2017–18 award years, but still wanted to work in his FWS job during the summer before returning in the fall semester, which award year EFC would be used? _________________How would his summer FWS earnings be drawn down if he began the summer FWS job on June 1, 2017?

Page 29


Maintaining Title IV Funds

Federal and nonfederal funds may be in same depository account unless ED requires separate accounts• Must identify account as containing federal funds• If revenue earned on held funds:

– Maintain Federal Perkins Loan earnings in Perkins Loan Fund

– Return other earnings > $500 to ED annually by June 30


Use of Title IV Funds

• Make disbursements• Other program-specific uses (e.g., FWS Job

Location Development Program)• Administrative cost allowance (ACA)

– Pell Grant: $5/recipient, when funding available– Campus-based programs: regulatory formula


© 2017 NASFAA 12


Campus-Based ACA Formula


Excess Cash

• Any Title IV funds (except Perkins Loan funds) not disbursed after 3 days of date funds drawn down or received

• Tolerance: May retain (up to 7 days) amount ≤ total Title IV funds drawn down in prior award year– After 7-day period, return any remaining

amount


Returning Undeliverable Title IV Funds

Title IV funds check or EFT issued to student or parent within 14 days

Check returned or EFT rejected

Attempt #1 to deliver returned check or rejected EFT

Must occur within 45 days after check returned or EFT rejected

Attempt #2 to deliver returned check or rejected EFT

Must occur within 45 days after previous attempt is returned or rejected

Cease delivery attempts and return funds to ED

240 Days


© 2017 NASFAA 13


Escheat Prohibition

• Regardless of the circumstances or time frames, the institution must have a process in place to ensure that Title IV funds never escheat to the school, the state, or any other third party.

• Escheatment is the reversion of funds to an unintended third-party, such as when a Title IV credit balance check sent to a student is not cashed, and the funds remain in the school’s depository account or are transferred to the state’s escheatment account.



• Under what funding method does your institution draw down and receive Title IV funds from the U.S. Department of Education?

• If your institution uses the reimbursement or cash monitoring payment method, explain why it is required.

• Why do you think schools are required to draw down Federal Work-Study (FWS) funds for hours worked before July 1 from the prior award year allocation and for hours worked on or after July 1 from the upcoming award year allocation?

Page 38


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• Should FWS drawdowns be different from how funds are drawn down for the other campus-based programs? Why or why not?

Page 38


Lesson 3: Disbursing Title IV Funds


Definitions

Financial account: Checking, savings, prepaid card, or other consumer asset account held directly or indirectly by a financial institution

Financial institution: Bank, savings association, credit union, or other entity that holds a financial account for the student, issues an access device associated with the account, and agrees to make EFT services

Disburse: Making a payment of Title IV funds to a student’s ledger account or directly to the student or parent PLUS borrrower

Student’s ledger account: Recordkeeping system used to record institutional charges, cash payments, and payments from Title IV funds


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Disbursement Time Frames

late-start

module

Start of payment period

10 days prior(credit-hour term-based)

30-day delay

10 days prior


Late Disbursements

• CPS processed ISIR• Official EFC

Pell and IASG

• CPS processed ISIR• Official EFC• School originated loan or grant

Direct Loan and TEACH

Grant

• CPS processed ISIR• Official EFC• School awarded loan or grant

FSEOG and Perkins Loan


Late Disbursements

• Make or offer to make late disbursement• Limit Direct Loan amount to educational

costs incurred for period when eligible for loan

• Late disbursement not permitted in certain cases

• Post-withdrawal disbursements are late disbursements to withdrawn students


© 2017 NASFAA 16


Retroactive Payment

Term One

Term One

Term Two

Term Two

Late Disbursement

Retroactive Payment


Disbursement Methods

• Credit funds to student’s ledger account

$


Tier One and Tier Two Arrangements

T1Third-party servicer performs functions related to making direct disbursements of Title IV funds

T2Financial institution offers and markets financial account(s) through the school into which Title IV funds directly deposited


© 2017 NASFAA 17


T1/T2 Direct Disbursement Selection Process

Options must be clear, fact-based, and neutral with no option preselected

– First option is student’s pre-existing financial account, if any

– May include financial accounts that are not T1 or T2

– Identify T1 and T2 accounts’ major features and common fees

– Provide link to terms and conditions of each option– Student not required to choose any option


T1 Arrangements

• Contract terms consistent with students’ best interest

• School may terminate contract under certain conditions


T1/T2 Disclosures

60 days after award

year end

Post T1 and/or T2

contracts to website

Beginning 7/1/17

Disclose account

information to students

Beginning 9/1/17

Post information regarding contracts


© 2017 NASFAA 18


T1 Arrangements

• Students must have convenient access to funds

• Restrictions on fees or costs associated with account


T2 Arrangements

T2 account directly marketed to students if:• School communicates directly to student about

account and how to open it• T2 account or access device is cobranded with

school name, logo, mascot, or other affiliation and marketed principally to school’s students

• Card or other device is used for institutional purposes validated to enable access to T2 account


T2 De Minimis Threshold

At least 1 student with Title IV credit balance in each of 3 recently completed award years, but for same period:• Average number of students with Title IV credit

balance ˂ 500; or• Average percent of students with Title IV credit

balance ˂ 5%


© 2017 NASFAA 19


Disbursements for Allowable Institutional Charges• Educationally-related

– Current year charges: unlimited– Prior year charges: up to $200

• Student’s or parent PLUS borrower’s authorization required for certain charges

• May include books and supplies as tuition charges under certain conditions




© 2017 NASFAA 20


Learning Activity: Prior Award Year Charges

Page 65



Review the scenarios described on page 65. Using the Prior Year Charges Flowchart on page 76, determine if prior year charges may be paid with current Title IV funds for each student below.


Page 65


Learning Activity: Prior Award Year Charges1. Angie’s school allows students to either have FWS paid

directly to them or have it applied to charges on their student ledger account. Angie provided authorization for her FWS earnings to be applied directly to any outstanding charges on her ledger account and for payment of any Title IV aid for other institutional charges. Angie received a late dorm utility charge from last year for $150. She has no other outstanding charges on her account. Can her current FWS earnings be used to pay her utility charge? Why or why not?

Page 65


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Learning Activity: Prior Award Year Charges2. Bernard has library fines of $250 on his ledger account from

the past two years. He is able to register for courses, but he will not be able to receive his degree or his final transcripts until his ledger account is paid in full. This year, Bernard only has a Direct Unsubsidized Loan and a parent PLUS Loan. Bernard expects to receive a Title IV credit balance of $500. There is no written authorization on file from Bernard or his parents. Can any of his Title IV aid for this year be used to pay the prior year charges? Why or why not?

Page 65


Program-Specific Disbursement Requirements• All programs may pay disbursements in

installments that best meets student’s needs– Lump sum disbursement allowed for current

and previous payment periods in award year Pell Grant, IASG, and TEACH Grants:

Determine enrollment status for previous payment period based on coursework completed


Program-Specific Disbursement Requirements• Pell Grant: Student may decline all or part of

disbursement to preserve future eligibility• TEACH Grant: Student must have

completed:– Agreement to Serve– Initial or subsequent counseling

• FSEOG and Perkins Loans: Award divided equally among payment periods unless student has uneven costs or resources


© 2017 NASFAA 22


Program-Specific Disbursement Requirements• Perkins Loans: School must:

– Have signed master promissory note (MPN)– Provide specific disclosures regarding

borrower’s rights and responsibilities• FWS: Before first payment for award period,

must inform student of amount authorized to earn, and how and when compensation paid– Pay at least monthly based on hours worked


Direct Loan Disbursement Requirements• Must have signed MPN• Must verify student continuously maintained

eligibility– If temporarily ceases half-time enrollment,

disbursement permitted provide under certain conditions


Direct Loan Disbursement Requirements• Counseling required before first

disbursement– “First-time” student borrowers complete

entrance counseling– PLUS borrowers may be able to qualify for loan

despite adverse credit history Borrower must complete counseling Endorser is not required to complete

counseling


© 2017 NASFAA 23


Direct Loan Disbursement Requirements• Disburse in substantially equal multiple

payments, unless exempt based on cohort default rate (CDR)

• Apply 30-day delayed disbursement of first disbursement of loan to “first-time, first-year” student borrowers



• Each Title IV program allows schools to pay a disbursement in whatever installments best meet the students’ needs. Do you think students would be better off without this option? Why or why not?

• Would you be in favor of one loan and one grant program to simplify the disbursement process? Why or why not? Do you think it would be more beneficial to students or schools?

Page 71


© 2017 NASFAA 24


• Do you know of any students who have declined or returned the Federal Pell Grant at your school? Does your school have a process in place to assist students who may want to do so?

• What does your school have in place to verify a student’s continuous eligibility for Direct Loans?

Page 71


Title IV Credit Balances

Title IV funds exceed allowable institutional charges • Portion that is not yet paid to the student• Excludes non-Title IV funds


• Total COA is $18,460 • Receives an outside scholarship

of $15,550, which covers her direct costs

• She already received:– Federal Pell Grant of $1,832– FSEOG of $500– Federal Perkins Loan of $575

Example: Lena


© 2017 NASFAA 25


Example: Lena

Not a Title IV credit

balance


Timeframe for Paying a Title IV Credit BalanceUnless authorized to hold Title IV credit balance, must pay no later than 14 days after:• Balance occurred, if occurred after 1st day of

payment period• 1st day of classes for payment period, if

balance occurred on or before that date


Provisions for Books & Supplies

Provide way to obtain required books and supplies by 7th day of payment period, if 10 days before payment period:• School could disburse Title IV aid for which

student is eligible• Student would have Title IV credit balance


© 2017 NASFAA 26




Page 65


Learning Activity: Title IV Credit Balances

Review the scenarios described on page 75. determine if each student has a Title IV credit balance, explain why or why not, and by what date it must be paid, if applicable.


Page 75


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Learning Activity: Title IV Credit BalancesHannah’s allowable charges for the fall term total $10,000 for tuition and fees. She has no institutionally-contracted room and board costs. Her first day of class is September 11. She has not authorized the school to hold any Title IV funds on her behalf. Payments toward Hannah’s $10,000 tuition and fee charges are applied as follows:

Page 75

August 17 $2,500 Paid by studentAugust 19 $2,000 State GrantAugust 19 $1,981 Institutional GrantAugust 31 $2,732 Federal Pell GrantAugust 31 $ 500 Federal Perkins LoanSeptember 1 $1,000 Private Scholarship


Learning Activity: Title IV Credit BalancesDoes Hannah have a Title IV credit balance? Yes NoWhen must the Title IV credit balance be paid, if applicable?

Page 75

August 17 $2,500 Paid by studentAugust 19 $2,000 State GrantAugust 19 $1,981 Institutional GrantAugust 31 $2,732 Federal Pell GrantAugust 31 $ 500 Federal Perkins LoanSeptember 1 $1,000 Private Scholarship


Learning Activity: Title IV Credit BalancesHun’s total charges for the payment period are $6,000 for tuition and fees. He has not authorized the school to hold Title IV funds on his behalf. The first day of classes for the payment period is August 28.

Payments toward his bill are applied as follows:

Page 75

August 9 $2,000 Private ScholarshipAugust 19 $1,000 Federal Perkins LoanAugust 19 $ 500 FSEOGSeptember 2 $ 913 Federal Pell GrantSeptember 9 $3,750 Direct Loan


© 2017 NASFAA 28


Learning Activity: Title IV Credit BalancesDoes Hun have a Title IV credit balance? Yes NoWhen must the Title IV credit balance be paid, if applicable?

Page 75

August 9 $2,000 Private ScholarshipAugust 19 $1,000 Federal Perkins LoanAugust 19 $ 500 FSEOGSeptember 2 $ 913 Federal Pell GrantSeptember 9 $3,750 Direct Loan


Lesson 4:Notifications and Authorizations


Notifications

• Make Title IV aid recipients aware of:– Upcoming disbursements– Rights and responsibilities

• Before disbursing Title IV funds, provide written notification of:– Student eligibility for Title IV aid– Payment information


© 2017 NASFAA 29


Notifications


Notifications

• Notify the student or parent PLUS borrower when Title IV loan funds are credited– Regularly scheduled disbursements– Late disbursements

• Before disbursing Title IV funds, provide written notification of:– Anticipated disbursement date and amount– Borrower’s right to cancel– Procedures and deadlines for changes


Notifications

• Timeframes based on application process– Active confirmation May provide notification 30 days before or

within 30 days after crediting the student’s account

– Passive confirmation Must send the notification no earlier 30 days

before or within 7 days after crediting the student’s account


© 2017 NASFAA 30


Notifications

• Loan cancellation requests– Active confirmation Reply by the later of the first day of the

payment period or 14 days after the date of the school’s notification

– Passive confirmation Reply within 30 days after the date the

school sent the notification• Deadlines extended under HEROES Act


Notifications


Notifications

• Notify the borrower when TEACH funds are credited– Anticipated disbursement date and amount– Borrower’s right to cancel– Procedures and deadlines for changes


© 2017 NASFAA 31


Notifications

• Timeframes– Provide notification no earlier than 30 days

before and no later than 30 days after crediting the student’s account

– Student replies by the later of: First day of the payment period; or 14 days after the date of the school’s

notification.– School is not obligated to honor late requests


Notifications


Notifications

• All notifications may be provided in writing or electronically– Electronic notifications require affirmative

consent of ability to access the information– Directing borrowers to a secure website is

acceptable– Borrower’s right to cancel– Procedures and deadlines for changes


© 2017 NASFAA 32



Learning Activity: Cash Management Notifications

Page 91


Learning Activity: Cash Management Notifications

Consider your school’s Title IV eligibility and payment information notification then answer the following questions. Record your answers to the questions on page 91.

Does the notification include all requirement elements? If no, what elements are missing?Does the school use an active or passive confirmation process? Why does it use this process?When does the school send out the Title IV eligibility and payment information notice?

Page 91


© 2017 NASFAA 33


• Do you believe all of the cash management notifications are necessary? Why or why not?

• Why do you think schools are given the option to honor loan cancellation requests received after the deadline?

• Do you think the information provided in the notice to credit TEACH Grant proceeds to a student’s ledger account is adequate? Why or why not?

Page 92


Authorizations

• Students and parents may authorize the school to proceed with certain services– Use of Title IV funds to pay certain current- and

prior-year institutional charges– Use of FWS earnings to pay certain current-

and prior-year institutional charges– Holding Title IV funds


Authorizations

Authorization School Activities Authorized

Who Provides Authorization When Comments

Use Title IV Funds (other than FWS) to Pay Certain Institutional Charges 668.164(c); 668.165(b)(1)(i),(2)-(4)

Disbursement of Title IV funds (other than FWS) by crediting student’s ledger account to pay: • Current award year

institutional charges for educationally-related costs other than tuition, fees, and institutionally-contracted room and board; and

• Prior award year institutional charges for educationally-related costs other than tuition, fees, and institutionally-contracted room and board of not more than $200

Note: Total amount of current year Title IV funds (including FWS) that can be applied to any prior award year charges cannot exceed $200

Student or parent, as applicable

Provided at discretion of student or parent prior to authorized activity

Authorization not required for Title IV programs other than FWS when crediting student’s ledger account for payment of: • Current award

year tuition, fees, or institutionally-contracted room and board; or

• Prior award year charges of tuition, fees, and institutionally-contracted room and board not exceeding $200


© 2017 NASFAA 34


Authorization Contents

• Obtain before carrying out authorized activity• Student and parent borrowers provide

separate authorizations• Schools cannot coerce student or parent

PLUS borrower to provide authorization• May be for specific period or entire period of

student’s enrollment• Written clearly in plain language


Cancellation of Authorization

• Student or parent PLUS borrower may cancel or modify authorization, effective on date school received notice– Not required to reverse any Title IV funds

credited before notice received– Must pay within 14 days any Title IV funds held

under prior authorization



© 2017 NASFAA 35


Learning Activity: Authorizations

Page 100


Learning Activity: Authorizations

Review your school’s Title IV authorizations and answer the following questions. Record your answers to the questions on page 100.

Do the authorizations include all requirement elements? If not, what elements are missing?Are the authorizations clear and easy to understand? If not, how would you improve the language?What format does your school use to collect authorizations? Why?

Page 100


• Why do you think students and parents need to authorize the use of Title IV funds to pay certain charges?

• Do you agree with the $200 limitation on using Title IV funds to pay prior award year charges? Why or why not?

• Do you think all the elements of authorizations are necessary? If not, what would you eliminate?

Page 101


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Question and Answer Segment


Thank you for attending!

Slide 108 © 2017 NASFAASlide 108 © 2016 NASFAA

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1801 PENNSYLVANIA AVENUE NW, SUITE 850WASHINGTON, DC 20006

202.785.0453 FAX. 202.785.1487 WWW.NASFAA.ORG

© 2017 National Association of Student Financial Aid Administrators

The National Association of Student Financial Aid Administrators (NASFAA)

provides professionaldevelopment for financial

aid administrators; advocates for public policies that increase

student access and success;serves as a forum on student financial aid issues; and is

committed to diversitythroughout all activities.

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