Colleges and universities play a vital role in facilitating federal student loans and financial aid to their student body. Enrollment changes make the role a difficult one. Administrators need thorough recordkeeping that monitors changes and provides the U.S. Department of Education (ED) the information it needs.
The volume of students entering and leaving the university, combined with the information involved in the federal student aid process, presents several compliance risks for educators. At a recent Department of Education Federal Student Aid conference, presenters discussed some of the most common compliance issues involving student aid and federal funds. Institutions should review their processes to determine whether adjustments or enhancements to reporting are needed.
1. Repeat Findings
One of the biggest errors that regulators see with student financial aid programs comes from failure to correct past areas of deficiencies. Deficiencies noted in a program review demand a corrective action plan (CAP). Regulators have found that colleges and universities may not have implemented a CAP or that the CAP in place does not address the root cause of noncompliance. Organizations should ensure that if they have a CAP in place, it is operating as it should. This may require enhanced internal controls around the program that can report on the CAP’s effectiveness and track the resolution of the compliance issue.
2. Inaccurate National Student Loan Data System Reporting
Organizations must report to the National Student Loan Data System (NSLDS) within 30 days of a student attendance change to update the NSLDS roster, unless a roster update is already due within 60 days. ED routinely finds that universities fail to provide notification of the last day of attendance or other changes in student enrollment status. It also finds that universities fail to report accurate enrollment types and effective dates. If your organization has had NSLDS reporting issues in the past, it should ensure that its CAP includes immediate NSLDS submission improvements and correction. It should also revise its NSLDS Policies and Procedures manual. If changes were made to the reporting process, employees should be trained on what they are so they can be prepared to implement those changes.
3. Return to Title IV Calculation Errors and Late Returns
Students receive Title IV funds on the condition that they will stay in school for the period of the Title IV award. When a student leaves before the end of the period, the remaining Title IV funds are returned to the university, and a Return to Title IV (R2T4) amount is calculated. Organizations should ensure their policies cover these frequently reported compliance errors in the R2T4 process, including:
- Incorrect institutional charges
- Incorrect number of days used in the term/payment period
- Incorrect withdrawal date
- Incorrect aid used as “could have been disbursed”
- Returns not made within 45-day allowable time frame
- Inadequate system in place to identify and track official and unofficial withdrawals
- No system in place to track number of days remaining in return funds
4. Verification Violations
ED uses a student’s Free Application for Federal Student Aid (FAFSA) to determine the type and amount of federal support the student receives. To ensure FAFSA information is accurate, ED uses a targeted, risk-based verification tool to review applications. ED flags for verification data that looks inaccurate or inconsistent. College administrators are tasked with collecting additional information to assist with verification, including applicants’ income tax returns, W-2 statements and Form 1099s. In compliance reviews, ED found deficiencies in the verification information collected, including:
- Incomplete documentation
- Untaxed income not verified
- Conflicting data not resolved
- Required corrections not processed
5. Satisfactory Academic Progress Policy Not Adequately Developed/Monitored
Students must demonstrate satisfactory academic progress (SAP) in order to remain eligible for federal financial aid. Universities set their own SAP policies. Generally, policies should include information about the time students have to complete their degree programming, including the pace of completion and the maximum timeframe. Policies should also contain guidance about how to reestablish aid eligibility. Compliance issues for SAP policies that the ED has uncovered include improper use of financial aid warnings, appeals and probations, failure to consistently apply the SAP policy and insufficient or missing documentation to support SAP. ED has also found issues with universities distributing financial aid to students who do not meet SAP standards.
For More Information
To learn more about how your institution can adjust its processes and reporting to minimize its risk of these federal student aid compliance issues, please contact us.
Terri Albertson is a Managing director in our Philadelphia office. She has more than 25 years of experience providing services to colleges and universities, quasi-governmental agencies, foundations and cultural organizations.