Your Board of Trustees has determined that your institution should offering Title IV financial aid, but many questions remain. Examples of such questions are:
- Are we required to participate in the student loan programs or can we just participate in the Federal Pell Grant Program?
- We are a new institution. How long do we have to wait before we can participate?
- If our institution is a candidate for accreditation and not fully accredited, are we allowed to participate?
- Are we restricted to offering certain programs? We don’t offer degree programs; can we still participate in the federal financial aid programs?
- What are our institution’s financial responsibilities?
- What does our institution do to participate in the federal programs?
- What are the pitfalls in preparing to participate?
- Where can we get help when we are on a limited budget?
We will answer these questions and provide a road map to participation in the dialogue below.
It is often the case with Christian Colleges that they philosophically do not want their students who are studying to be pastors or missionaries to be encumbered with debt, so they have not participated. It is important to know that an institution may participate in the Federal Pell Grant Program only and they are not required to offer student loans.
Minimum requirements to start offering Title IV financial aid are as follows:
- A school must be authorized by the state in which they are located to provide an educational program that is beyond secondary education.
- A school must admit as regular students only persons who have a high school diploma or equivalent.
- he school must provide at least one eligible program that provides an Associate Degree or higher or provides training to students for employment in a recognized occupation and is at least 300 clock hours and ten weeks in program length.
- The school must be accredited (or a not-for-profit candidate for accreditation) by an accrediting agency recognized by the Secretary of Education.
- A school must have provided its eligible programs for at least two years prior to applying to participate.
- Once these standards are met, the institution must obtain an Office of Post-Secondary Education (OPEID) number and access to complete the multi-page application for participation.
- Once the application has been submitted, the institution will be required to submit various policies and procedures to indicate the institution’s administrative capability. From application to approval could take up to twelve months
That was the easy part!
The most time consuming and expensive part of preparing to start offering Title IV financial aid is accreditation and finances.
Accreditation – To apply for accreditation, the institution must be in business for two years before it can apply to a Department-of-Education-approved accrediting agency, completing extensive self-evaluation reports. The self-evaluation reports are book-length and require the institution to explain how it complies with fulfilling the requirements of the accreditation standards.
Our best advice is for your institution to engage the consulting services of Agron & Associates, Inc.
Since 1999, Agron & Associates, Inc. has specialized in helping Christian colleges achieve accreditation. By working with Agron, a school is more likely to achieve accreditation, likely to achieve it sooner, and likely to become a stronger school because of their help.
Yes, there are consulting fees involved; but in the long run, getting accredited is the basic requirement for participation in the Title IV programs, and dragging out the process without assistance can be costlier.
Financial Standards – The major stumbling block for participation in the Title IV programs is the requirement that schools must have completed audits for the two most recently completed years.
Most institutions are aware of this requirement as audits are required by the various accreditation agencies, but no one has told them that their audits, which are prepared according to Generally Accepted Accounting Principal (GAAP), must also be audited according to Generally Accepted Government Auditing Standards (GAGAS). When the audit is not prepared according to GAGAS standards it cannot be submitted to the U.S. Department of Education when the school applies for eligibility. Imagine the frustration of gaining accreditation, and then not offering Title IV financial aid after telling students that it would be available within a year or so.
As a consultant and third-party service assisting Christian Colleges, Bible Colleges and Seminaries to prepare and submit applications for participation in the Title IV programs, we are very much aware of the frustration institutions experience when they become a candidate for accreditation or receive full accreditation and cannot submit the application for participation because their audit was not done in a GAGAS format.
We currently have eight institutions in a holding situation while their audits are being re-done in a GAGAS format, so we know the frustrations first hand. The institution’s administrators thought they had met all the requirements by becoming a candidate for, or fully accredited by, a recognized accrediting agency, but were stopped dead in their tracks because the audits were not done according to the U.S. Department of Education’s requirements.
Meeting the U.S. Department of Education’s financial stability standards also requires an analysis and scoring of the institution’s financial situation. The scoring process evaluates the institution on a scoring ratio of 1 to 3. Any score less than 1.5 may cause the institution to be denied eligibility for Title IV. Explaining the financial stability standards is a lengthy process and since we are not a CPA firm, we will not attempt to fully explain the process. However, we can provide interested parties with written information regarding the standards and will gladly provide them if you will contact us at firstname.lastname@example.org.
We have spoken with Matt Knutte, CPA of the accounting firm of Knutte & Associates regarding his advice for institutions planning to apply for participation in the federal programs. His thoughts come from years of experience conducting audits in proprietary, public, and not-for-profit colleges and universities. His thoughts are as follows:
- Have a clean set of accounting records, which could be easily audited.
- Do your institution’s accounting on an accrual basis.
- Be sure to engage an auditor who understands higher education systems.
- Be sure to engage an accountant who understands doing a GAGAS audit and has the credentials to support it.
The final thought comes not from the CPA but from our over forty years’ experience in working with Title IV schools.
- When selecting an auditor to represent your institution, select one with higher education experience. And, while your budget is important, choosing an auditor totally on a lower price could cause your institution to be denied eligibility or cause problems if the auditor has misreported your institution’s finances. Auditors may claim that they can do your audit but, unless they have proven experience in doing higher education audits and Title IV financial aid audits, we do not feel that your institution is safe in engaging an inexperienced auditor.
All the thoughts in this article are based on real-life experiences in helping institutions maneuver the intricate details of applying to be offering Title IV financial aid programs.
Should anyone reading this article have questions about offering Title IV financial aid or need clarification, please feel free to contact us by phone at 888-857-8690, email us at email@example.com, or visit our website at www.weberassociatesinc.com. Follow up questions related to this article are answered without consulting fees or further obligations.
This article has been prepared by Harry V. Weber president of Weber & Associates, a third-party service meeting the financial aid needs of higher education institutions in over 200 locations in 36 states and 8 foreign countries.