1. National Association of Student Financial Aid Administrators Presents… © NASFAA 2006 Cash Management Module 11

2. Slide 11 - 2 © 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

3. Slide 11 - 3 © NASFAA 2006 Cash Management Review of regulatory requirements for: –Requesting Title IV funds –Disbursing Title IV funds –Maintaining Title IV funds

4. Slide 11 - 4 © 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)

5. Slide 11 - 5 © NASFAA 2006 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

6. Slide 11 - 6 © NASFAA 2006 Common Origination and Disbursement For Federal Pell Grants and Direct Loans, COD is used to: –Request funds –Report disbursement and origination data –Reconcile accounts

7. Slide 11 - 7 © NASFAA 2006 Payment Methods Advance Just-in-time Reimbursement Cash monitoring

8. Slide 11 - 8 © NASFAA 2006 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

9. Slide 11 - 9 © NASFAA 2006 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

10. Slide 11 - 10 © NASFAA 2006 Advance Payment Method Federal Pell Grant and Direct Loan funds received via: –Advanced Funded method; or –Pushed Cash method

11. Slide 11 - 11 © NASFAA 2006 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

12. Slide 11 - 12 © NASFAA 2006 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

13. Slide 11 - 13 © NASFAA 2006 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

14. Slide 11 - 14 © NASFAA 2006 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

15. Slide 11 - 15 © NASFAA 2006 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

16. Slide 11 - 16 © NASFAA 2006 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

17. Slide 11 - 17 © NASFAA 2006 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 campus- based awards

18. Slide 11 - 18 © NASFAA 2006 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

19. Slide 11 - 19 © NASFAA 2006 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

20. Slide 11 - 20 © NASFAA 2006 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

21. Slide 11 - 21 © NASFAA 2006 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

22. Slide 11 - 22 © NASFAA 2006 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

23. Slide 11 - 23 © NASFAA 2006 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

24. Slide 11 - 24 © NASFAA 2006 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

25. Slide 11 - 25 © NASFAA 2006 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

26. Slide 11 - 26 © NASFAA 2006 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

27. Slide 11 - 27 © NASFAA 2006 Nonterm Credit-Hour Programs Re-entry example—48 credit-hour and 60- week 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

28. Slide 11 - 28 © NASFAA 2006 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

29. Slide 11 - 29 © NASFAA 2006 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

30. Slide 11 - 30 © NASFAA 2006 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

31. Slide 11 - 31 © NASFAA 2006 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

32. Slide 11 - 32 © NASFAA 2006 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

33. Slide 11 - 33 © NASFAA 2006 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

34. Slide 11 - 34 © NASFAA 2006 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

35. Slide 11 - 35 © NASFAA 2006 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

36. Slide 11 - 36 © NASFAA 2006 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

37. Slide 11 - 37 © NASFAA 2006 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

38. Slide 11 - 38 © NASFAA 2006 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

39. Slide 11 - 39 © NASFAA 2006 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

40. Slide 11 - 40 © NASFAA 2006 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

41. Slide 11 - 41 © NASFAA 2006 Nonallowable Charges If charges are outside realm of educational purpose, Title IV funds must not be applied Examples: –iPODs –Vacations –Automobiles –Electronic entertainment equipment

42. Slide 11 - 42 © NASFAA 2006 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

43. Slide 11 - 43 © NASFAA 2006 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

44. Slide 11 - 44 © NASFAA 2006 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

45. Slide 11 - 45 © NASFAA 2006 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

46. Slide 11 - 46 © NASFAA 2006 Disbursement Authorizations Authorized services: –EFT –Disbursement to student’s school account –Holding excess funds

47. Slide 11 - 47 © NASFAA 2006 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

48. Slide 11 - 48 © NASFAA 2006 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

49. Slide 11 - 49 © NASFAA 2006 Disbursement Requirements Federal Pell Grants FSEOG and Federal Perkins Loan funds (common requirements) Federal Perkins Loans FWS wages FFEL and Direct Loans

50. Slide 11 - 50 © NASFAA 2006 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

51. Slide 11 - 51 © NASFAA 2006 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

52. Slide 11 - 52 © NASFAA 2006 FFEL and Direct Loan Disbursements Delayed delivery/disbursement to first- time, 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

53. Slide 11 - 53 © NASFAA 2006 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

54. Slide 11 - 54 © NASFAA 2006 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

55. Slide 11 - 55 © NASFAA 2006 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

56. Slide 11 - 56 © NASFAA 2006 Example: Eva (no authorization) $3,000 Tuition, fees, institutionally- contracted room and board (allowable charges) – 4,000 Title IV aid (does not include PLUS) – $1,000 Title IV credit balance

57. Slide 11 - 57 © NASFAA 2006 Example: Eva (authorization provided) $3,000 Tuition, fees, institutionally- contracted 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

58. Slide 11 - 58 © NASFAA 2006 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

59. Slide 11 - 59 © NASFAA 2006 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:$1,000Paid by student August 10:$1,000State grant August 10:$2,000Institutional loan August 26:$1,000Federal Pell Grant August 26:$ 600Federal Perkins Loan August 27:$1,000Private scholarship

60. Slide 11 - 60 © NASFAA 2006 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:$1,000Private scholarship August 17:$ 600Federal Perkins Loan August 17:$ 300FSEOG September 2:$1,150Federal Pell Grant September 7:$ 700Direct Loan

61. Slide 11 - 61 © NASFAA 2006 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

62. Slide 11 - 62 © NASFAA 2006 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 interest- bearing accounts if school does not meet certain exceptions

63. Slide 11 - 63 © NASFAA 2006 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

64. Slide 11 - 64 © NASFAA 2006 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

65. Slide 11 - 65 © NASFAA 2006