1. 1 Michigan Student Financial Aid Association June 28, 2016 Kevin Campbell, Training Officer, U.S. Department of Education

2. Need for Regulatory Action

3. Proliferation of Campus Cards Passage of the CARD Act restricting credit card marketing, preferred lender lists, declining State funding Widespread increase of debit and prepaid card agreements Marketed as a way for students to receive credit balance refunds Typically on student IDs or cobranded cards 3 3

4. Government and Consumer Investigations 2012 USPIRG report identified several troubling practices in this market Later confirmed by Government Accountability Office, ED Inspector General, Consumers Union Enforcement actions by FDIC, Federal Reserve Troubling practices included unfair fees, misrepresentation, and transmission of private student information without consent 4 4

5. 5 Cash Management Regulations Notice of Proposed Rulemaking (NPRM) Federal Register – May 18, 2015 Final Federal Register - October 30, 2015 General effective date - July 1, 2016 Contract disclosure – September 1, 2016 T1/T2 major feature and fee disclosures – July 1, 2017 Summary account cost disclosures – September 1, 2017 Federal Register Notice – April 7, 2016 –Schools MAY early implement the following – Repeat coursework Depository accounts and interest-bearing depository accounts

6. 6 Cash Management Q & As Electronic announcement published May 12, 2016 –Contains a series of Q & As related to the new cash management regulations –Topics include: Definitions T1/T2 examples Student choice menu Fee limitations Disclosure requirements Books and supplies

7. Overview of Regulations October 30, 2015: Final regulations published Account arrangements: Require convenient access to aid Account arrangements: Prohibit fees uncommon in market Account arrangements: Require disclosures Other cash management updates to modernize Most provisions effective July 1, 2016 7 Two other topics: Repeat coursework, Clock hour program definition

8. Debit Card Provisions: Who is covered? Tier 1 (T1) Arrangement U.S. school with third-party servicer*; and Servicer processes direct payments of Title IV aid; and Aid disbursed to contracted account or; Information about contracted account is provided to student Tier 2 (T2) Arrangement U.S. school that has a contract with provider; and Provider is not a third-party servicer; and At least one Title IV credit balance recipient in 3 most recently completed award years use account; and Product is marketed to students through school communication, student IDs, or cobranded cards 8 *Third party servicers defined in GEN-15-01

9. Cash Management Q & A 9 TA Q7: The athletics department has an agreement with a bank to offer bank accounts that can be linked to the student ID card, but the arrangement has nothing to do with Title IV credit balance disbursements. Does this still count as a T2 arrangement? TA A7: Yes. Any account that can be linked to a student ID will be considered, at minimum, to be an account under a T2 arrangement. 9

10. 10 Account Arrangements If a third-party servicer that contracts with an institution is offering or marketing multiple accounts to Title IV recipients at that institution, all of those accounts would be required to comply with the requirements for T1 arrangements –Even if some accounts would normally be a Tier 2 account Account requirements end when student no longer enrolled and no pending Title IV disbursements, except certain reporting requirements Apply to student TIV credit balances, not parent TIV credit balances (optional)

11. Overview of new requirements All T1 and T2 Student choice menu No automatic opening of accounts Privacy restrictionsContract disclosure All T1 ATM networkFee restrictions Contracts negotiated in best interest of students Average student cost disclosure T2 (more than de minimis) Fee-free ATM Contracts negotiated in best interest of students Average student cost disclosure 11

12. Student Choice – Menu Menu of options required Tell student in writing that no specific account is required Menu options must be presented neutrally with no default option Existing bank account must be first and most prominent option Paper checks don’t need to be listed, but can be at school’s option 12 Student can change option in writing at anytime Initiating direct payments by EFT to a student’s existing financial account is as timely and as initiating an EFT to an account provided under a T1 or T2 account

13. Cash Management Q & A 13 SCM Q1: The regulations state that institutions must ensure that “initiating” direct payments by electronic funds transfer (EFT) to an existing account is as timely as it is to send money to an account under a T1 or T2 arrangement. What does this mean? SCM A1: This means that institutions and financial institutions with T1 and T2 arrangements cannot create any unnecessary delay by processing a student’s existing banking and payment information more slowly than accounts made available under T1 and T2 arrangements…we also have stated that there can be no difference in the time between initiating a payment to a student’s bank account and initiating a payment to an account opened under a T1 or T2 arrangement. 13

14. 14 Student Choice - Menu Ensure that a student who does not make an affirmative selection is paid the full amount of the Title IV credit balance within the 14-day required timeframe

15. Student choice – menu contents All T1 and T2 accounts must be listed Other accounts may be listed Major features and fees of T1/T2 must be disclosed Link to full terms and conditions of T1/T2 accounts 15

16. Student choice – menu format Model disclosure Created by CFPB Not yet available Required by July 1, 2017 Publication in Federal Register 16

17. Student Consent Problems Private student information given to account provider without consent Provider used this information to open account or market to students, even if student never received Title IV funds Requirements Required for all T1 and T2 arrangements. Student consent to open account required before PII can be shared Once shared, information can only be used for disbursement, not marketing Consent required before sending card to students, except for unlinked student ID Consent required before linking a student ID to financial account 17

18. Fees Problems Limited ATM access makes out-of-network fees common Point-of-sale fees of $0.50 per transaction when using PIN (uncommon in market) $25-$35+ for each overdraft (if offered), with transaction re-ordering to maximize fees Requirements Only T1 arrangements are subject to fee restrictions No fees charged to students for point-of-sale transactions or overdrafts are allowed School must provide national or regional ATM network that are fee-free for balance inquiries or withdrawals School must provide at least one convenient way for student to access Title IV credit balance 18

19. Cash Management Q & A 19 FL Q2: How should institutions with T1 relationships comply with the requirement of fee-free withdrawal throughout enrollment? FL A2: Institutions may use whatever method they wish (check, cash, EFT, etc.) to comply with the requirement that a student have a convenient way to withdraw his or her Title IV funds in whole or in part, as long as the student does not incur a fee when exercising this option. 19

20. Disclosures Problems Contracts are often private Students do not have sufficient information to assess cost of account Students receive poor account terms because schools do not negotiate on behalf of students Requirements Required for all T1 and T2 School must post full contract (excluding security and IT information) to school website School must send up-to-date URL to Department Department will aggregate list of websites and publish list for public and government review Effective September 1, 2016 and then 60 days following most recently completed award year thereafter 20

21. T1 & T2 arrangements (with sufficient credit balance recipients)

22. T2 De Minimis Threshold Some regulatory provisions limited to T2 arrangements with a sufficient number of credit balance recipients. The school must comply with the additional requirements if during the school’s prior three award years, either: 22 Average of 500+ students have Title IV credit balance Average of 5%+ of students have Title IV credit balance T1 arrangements do not have a de minimis threshold OR 22

23. Summary Cost Disclosures Required for accounts offered under T1 arrangements or T2 arrangements with more than a de minimis number of credit balance recipients Effective by September 1, 2017 Then 60 days following most recently completed award year thereafter If the institution had 30 or more credit balance recipients in the prior award year, it must publish the following on the same website as contract disclosure: 23 The total consideration paid, monetary and non- monetary, by the parties under the contract during the past award year Number of students with financial accounts under the contract at any time during the past award year Mean and median annual costs to student account holders 23

24. Best Interest of Students Required for accounts offered under T1 arrangements or T2 arrangements with more than a de minimis number of credit balance recipients Future contracts, fees, and technological changes must occur without harming students Ensure no cost to open account or receive or validate an access device Institution documents that it conducts reasonable due diligence reviews at least every two years to ascertain whether the fees imposed under the T1 or T2 arrangement are, considered as a whole, consistent with or below prevailing market rates 24

25. 25 Best Interest of Students School must ensure that the terms of the accounts are not inconsistent with the best financial interests of students School must document it has reviewed that fees under the arrangement are consistent with or below market rates Ensure contract can be terminated due to complaints or excessive fees

26. Convenient ATM Access 26 Required for accounts offered under T1 arrangements or T2 arrangements with more than a de minimis number of credit balance recipients Surcharge-free ATMs must be present in sufficient number and must be housed and serviced such that Title IV funds are reasonably available to students 26

27. Convenient ATM Access 27 Examples At a large campus with thousands of title IV recipients, it is likely that several ATMs would be required If an institution has a location with only a few credit balance recipients, or a location where students are only taking one class, an ATM that is part of a larger regional network at a store several blocks away may be sufficient A location of an institution providing students with 100 percent of an educational program in a small town in a rural region would need to provide ATM access on campus if students would otherwise have no free access to their funds through an in network ATM or branch office of the account provider located in the town 27

28. Convenient ATM Access 28 Signs of potential ATM access problems ‘‘runs’’ on fee-free ATMs Students are forced to incur an abnormally high number of out-of-network ATM fees Institution receives complaints about the number and location of its ATMs 28

29. Other Cash Management Provisions 29

30. Direct Disbursements to Students Other Federal agencies already make benefits payments directly (e.g. Treasury Direct Express Card for Social Security benefits) The regulations do not establish a direct payment system, but gives notice of the Secretary’s authority in this area If we determine that a direct payment system would be more beneficial, we would provide advance notice by a notice in the Federal Register 30

31. Risk of Loss Schools may not engage in any practice that risks the loss of Federal funds Refers primarily to sweeps Includes funds held in a Title IV depository account or a school’s operating account Nothing prohibits a school from sweeping its own funds, but it must ensure that any Title IV funds are not part of the sweep 31

32. Reimbursement and HCM Reimbursement/HCM2 Must credit student’s ledger account AND PAY any credit balances due to the students BEFORE requesting reimbursement May not obtain authorization to hold credit balance funds Must provide documentation as part of its request that the credit balances were paid HCM1 Must credit student’s ledger account AND PAY any credit balances due to the students BEFORE submitting a request for funds May not obtain authorization to hold credit balance funds 32 Must include all Title IV funds student is eligible for when determining Title IV credit balances

33. Maintaining & Accounting for Funds 33  Must maintain Title IV funds in a depository account insured by FDIC or NUCA  Eliminates use of investment accounts for Title IV funds

34. Maintaining & Accounting for Funds 34  Require interest-bearing depository accounts to the extent practicable under OMB guidance in 2 CFR 200.305(b)(8). OMB does not require an interest-bearing account if:  School receives less than $120,000 annually  Best available account not expected to earn more than $500 on Federal cash balances  Bank would require an average or minimum balance so high it is not feasible in light of Federal/non-Federal cash resources

35. Maintaining & Accounting for Funds 35  Consistent with OMB guidance, any interest earned over $500 must be remitted to Dept. HHS no later 30 days after award year  Department of HHS  Payment Management System  Rockville, MD 20852

36. Disbursing Funds 36  School must disburse Title IV funds a student is eligible to receive for current payment during that payment period  Exceptions  late disbursements  retroactive payments  payments for prior-year charges

37. Disbursing Funds 37  School may credit student’s account with TIV funds to pay only for charges associated with the current payment period  School that charges upfront for entire cost of a program (or charges for more than a payment period) must prorate the charges

38. Proration of Payment Period Charges: if charge for more than PP For programs with substantially equal PPs : For all other programs: 38 Total Institutional Charges for Program Number of PP in Program = Institutional Charges for PP Credit or Clock hours in PP Credit or Clock hours in Program X Total Institutional Charges ( )

39. Prior-Year Charges Amount No changeStill $200 When allowed In one or more payment periods in the current year Current year Student receives DL: the current loan period Student does not receive DL: the current award year NEW: Student receives DL and other TIV: Either the current loan period or award year 39 - A prior year is any loan period or award year prior to the current loan period or award year

40. Books/Supplies in Tuition & Fees Allowed if School has arrangement with book publisher or other entity Books/supplies available to students for prices below competitive market rates Provides a way for students to obtain the books and supplies by the seventh day of the payment period, and Has a policy permitting students to opt out* 40 *opting out also opts out of book and supply disbursements under 668.164(m)

41. Books/Supplies in Tuition & Fees Also allowed if: The books and supplies are not available elsewhere or accessible by students from sources other than those provided or authorized by the school, OR The school documents there is a compelling health or safety reason 41

42. Cash Management Q & A 42 BAS Q1: Are the books and supplies provisions in the regulations tied to T1 and T2 arrangements, or must all institutions comply with these provisions? BAS A1: All institutions must comply with the books and supplies provisions. 42

43. Cash Management Q & A 43 BAS Q2: The regulations state that an institution may include the costs of books and supplies as part of tuition and fees if the institution has an arrangement that enables it to make those books or supplies available to students below competitive market rates. What does “below competitive market rates” mean? BAS A2: The phrase “below competitive market rates” means that the price charged to students is below the price generally available to the public. It does not refer to the list or “sticker” price of the book. Institutions are expected to demonstrate that they have researched available prices of books and supplies before including the cost in tuition and fees. 43

44. Cash Management Q & A 44 BAS Q3: Do institutions that arrange for bulk rental or purchase of textbooks for all students in a program and include the cost of those materials in tuition and fees…have to provide a mechanism for students to opt out of such an arrangement? BAS A3: Institutions must have a process that allows students to opt out…and notify students of the option to opt out of the arrangement, unless the books or supplies are not available elsewhere or there is a compelling health or safety reason to use certain books and supplies. For any student who opts out, the institution must reduce the tuition by the cost of any books and supplies included in tuition and fees. The reduction for students who opt out must reflect the institution’s per-student cost of the books. 44

45. Provisions for Books And Supplies 45 Requirement to provide books and supplies by the 7 th day of a payment period if: TIV aid could have been given to the student 10 days prior to the beginning of the payment period and; A TIV credit balance would have been created Effective July 1, 2016 - applies to any Title IV recipient Previously applied only to Pell Grant recipients 34 CFR 668.164(m)

46. Confirm Eligibility & Disbursement Must confirm that a student is eligible for the type and amount of Title IV funds represented by the disbursement School Also must confirm eligibility if engaged to conduct activities or transactions that lead to or support a disbursement Develop process or periodic review Third-party servicer Determining the type and amount of Title IV funds that a student is eligible to receive Requesting Title IV funds Accounting for funds to the Department Activities or transactions 46 “Jointly responsible and liable”

47. 47 Additional Changes to General Provisions: 10/30/15 Federal Register Final Rule

48. §668.2, Full-time student Retaking coursework, term-based programs Still allows for one repetition of a passed class Eliminates the provision prohibiting any repetition of previously passes coursework because the student failed other coursework Applies to all undergraduate, graduate, and professional students Repeat Coursework 48

49. §668.8(k) Clock/credit hour conversion Eliminates the provisions in (k)(2) that otherwise requires a program to be measured in clock hours: Receives Federal or State approval or licensure to offer the program Completing clock hours is required for graduates to apply for licensure or practice the occupation The credit hours awarded do not comply with the definition of a credit hour Eliminates the provision in (k)(3) relating to a component of a program includes a minimum number of clock hours Schools can still offer programs in clock hours Clock Hour Program Definition Removed 49

50. Effective July 1, 2016 the US Dept. of Education will no longer define an academic program as having to be a clock hour program for Title IV purposes –Even if a school reports clock hours to a state entity, as long as the state does not require the program to be offered in clock hours, the school can offer the program in clock OR credit hours Clock Hour Program Definition Removed 50

51. HOWEVER, undergrad credit certificate programs MAY still be subject to clock-to-credit hour conversion –If subject to the conversion formula, the school must still evaluate clock hours when determining the number of Title IV credit hours for program length and student enrollment status for Title IV purposes Clock Hour Program Definition Removed 51

52. Under “Credit Hour” Topic – CH-Q9. …For affected institutions that wish to transition back to credit hours…When can an institution transition to credit hours? CH-A9. …institutions may transition to credit hours from clock hours at 3 different times: –Institutions can teach the remainder of the current program to currently enrolled students as a clock hour program; –New students (enrolled after 7/1/16) may be enrolled under the new regulations; –An institution may choose to switch from clock hours to credit hours at the end of a payment period (as long as the payment period ends after 7/1/16). Program Integrity Website Q & As 52

53. Under “Credit Hour” Topic – CH-Q10. When can an institution update its Eligibility and Certification Approval Report (ECAR) to reflect the new status of the program? CH-A10. An institution can update its ECAR starting July 1, 2016, after the revised regulations take effect. Program Integrity Website Q & As 53

54. Need Help? 54 Research and Customer Care Center 800.433.7327 fsa.customer.support@ed.gov Reach FSA 855.FSA.4FAA -- 1 number to reach 10 contact centers! Campus Based Call Center eZ-Audit CODSchool Eligibility Service Group CPS/SAIGForeign Schools Participation Division NSLDSResearch and Customer Care Center G5 Nelnet Total & Permanent Disability Team

55. Angela Smith has transferred to another office within FSA Zack Goodwin will be covering Region V in addition to his other duties Zack Goodwin Training Officer, Federal Student Aid US Department of Education zachary.goodwin@ed.gov 617.289.0051 Region V Training Officer 55

56. Contact Information Zack GoodwinKevin Campbell zachary.goodwin@ed.govkevin.campbell@ed.gov 617.289.0051 214.661.9488 56 6 6

57. Training Feedback To ensure quality training we ask all participants to please fill out an online Module evaluation https://s.zoomerang.com/s/KevinCampbell-TX Survey feedback is a tool to help us improve our training, justify training/travel expenditures and to listen to our customers. Please provide any comments regarding this training or the trainer to: Jo Ann Borel, Title IV Training Supervisor joann.borel@ed.gov joann.borel@ed.gov 57

58. Thank You MSFAA! 58