Cash Management A NASFAA Authorized Event Presented by [Name of Presenter/Association] [Location] [Date], 2017.

Cash Management A NASFAA Authorized Event Presented by [Name of Presenter/Association] [Location] [Date], 2017

Lesson 1: Introduction to Cash Management

Effective Cash Management
Rules and procedures related to managing Title IV funds Request Maintain Disburse Use Return

Effective Cash Management
Eligible students only Timely delivery Cash flow Avoid excess cash Minimize interest accrual Appropriate accounting Avoid overpayments Clear audit trail

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

Undergraduate Program Type
Academic Year Minimum Hours Minimum Weeks in a Year Undergraduate Program Type Credit Hours 30 weeks 24 semester or trimester 36 quarter Clock Hours 26 weeks 900 clock

Graduate/ Professional Program Type
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

Standard & Nonstandard (SE) Term
Payment Period Standard & Nonstandard (SE) Term Nonstandard (NSE) Nonterm Clock-hour

Academic Year Payment Period Nonterm and clock-hour programs
For Direct Loans in nonstandard NSE programs Academic Year

Academic Year Payment Period Nonterm and clock-hour programs
For Direct Loans in nonstandard NSE programs Academic Year ½ weeks of instruction ½ credit or clock hours

Second Payment Period First Payment Period Payment Period
Nonterm and clock-hour programs For Direct Loans in nonstandard NSE programs Second Payment Period First Payment Period ½ weeks of instruction ½ credit or clock hours

Second Payment Period First Payment Period Payment Period
Nonterm and clock-hour programs For Direct Loans in nonstandard NSE programs Second Payment Period First Payment Period ½ credit or clock hours ½ weeks of instruction

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

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

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

Requesting Title IV Funds
Depository Account: A bank or investment account into which ED deposits all Title IV funds requested by the school.

Heightened Cash Monitoring
Title IV Funds Payment Methods 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 20 Fall Semester

Learning Activity: Crossover Payment Period Drawdowns Page 29

Learning Activity: Crossover Payment Period Drawdowns
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

Peter 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

Neverland 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

                       
Learning Activity: Crossover Payment Period Drawdowns                         Page 29

If 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? 2017–18 Hours worked before July 1 would be paid out of the 2016–17 award year allocation and hours worked on or after July 1 would be paid out of the 2017–18 award year allocation. 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

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

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

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 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 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

Disbursement Time Frames
Start of payment period 30-day delay late-start module 10 days prior (credit-hour term-based) 10 days prior

Direct Loan and TEACH Grant
Late Disbursements CPS processed ISIR Official EFC Pell and IASG School originated loan or grant Direct Loan and TEACH Grant 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

Retroactive Payment Term One Term Two Term One Term Two
Late Disbursement Term One Term Two Retroactive Payment

Disbursement Methods Credit funds to student’s ledger account $

Tier One and Tier Two Arrangements
Third-party servicer performs functions related to making direct disbursements of Title IV funds T2 Financial institution offers and markets financial account(s) through the school into which Title IV funds directly deposited

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

60 days after award year end Beginning 7/1/17 Beginning 9/1/17
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

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%

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

Learning Activity: Prior Award Year Charges Page 65

Learning Activity: Prior Award Year Charges
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. Record your answers to the questions on page 65. Page 65

1. 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? Yes. Angie provided authorization for current award year aid to be used to pay prior year educationally-related charges and the amount is less than the $200 maximum allowed. Page 65

2. 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? No. There is no written authorization on file. 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

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

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

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

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

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

Example: Lena 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

Not a Title IV credit balance
Example: Lena Not a Title IV credit balance

Timeframe for Paying a Title IV Credit Balance
Unless 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

Learning Activity: Prior Award Year Charges 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. Record your answers to the questions on page 75. Page 75

Hannah’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: August 17 $2,500 Paid by student August 19 $2,000 State Grant $1,981 Institutional Grant August 31 $2,732 Federal Pell Grant $ 500 Federal Perkins Loan September 1 $1,000 Private Scholarship Page 75

 Learning Activity: Title IV Credit Balances
Does Hannah have a Title IV credit balance?  Yes  No When must the Title IV credit balance be paid, if applicable?  Only $3,232 of the total $10,713 are Title IV funds. The 14-day rule does not apply. August 17 $2,500 Paid by student August 19 $2,000 State Grant $1,981 Institutional Grant August 31 $2,732 Federal Pell Grant $ 500 Federal Perkins Loan September 1 $1,000 Private Scholarship $713 credit Page 75

Hun’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: August 9 $2,000 Private Scholarship August 19 $1,000 Federal Perkins Loan $ 500 FSEOG September 2 $ 913 Federal Pell Grant September 9 $3,750 Direct Loan Page 75

 Learning Activity: Title IV Credit Balances
Does Hun have a Title IV credit balance?  Yes  No When must the Title IV credit balance be paid, if applicable?  Of the $2,163 in excess funds, $163 were from his Direct Loans. The $163 must be paid to Hun by September 23, which is 14 calendar days after it was applied to his account. August 9 $2,000 Private Scholarship August 19 $1,000 Federal Perkins Loan $ 500 FSEOG September 2 $ 913 Federal Pell Grant September 9 $3,750 Direct Loan $2,163 credit Page 75

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

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

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

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

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

Do you believe all of the cash management notifications are necessary
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 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

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

Cash Management A NASFAA Authorized Event Presented by [Name of Presenter/Association] [Location] [Date], 2017.

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Cash Management A NASFAA Authorized Event Presented by [Name of Presenter/Association] [Location] [Date], 2017.

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