When a Dept. of Education auditor checks on how you are managing your Title IV programs, don’t get caught with one of the three most common errors discovered in the Return of Title IV Funds.
Recent audits and U.S. Department of Education program reviews reveal several areas which if mishandled or overlooked can cause problems for institutions.
In our efforts to alert you to potential problems, we also offer solutions or procedures to avoid dangers in managing Title IV for your school. Here are a few:
Return of Title IV Funds (R2T4) ALERT
The three most common errors discovered in the Return of Title IV Funds (R2T4) calculations are:
- Inadequate or erroneous documentation of the last date of recorded attendance (LDA) or in the case of clock-hour schools, inadequate documentation of hours earned at the time of withdrawal.
Institutions are expected to have adequate documentation to validate the student’s last date of attendance (LDA). Such documentation should include evidence of class attendance up to the LDA or evidence supporting that a schedule was conformed to, or that clock hours were earned, if applicable.
- Incorrect calculation of the refund.
This should not occur if you are using an R2T4 calculation tool and you have entered the correct LDA and the correct institutional charges and payments for the calculation.
- Making R2T4 payments in a timely manner: i.e. no later than 45 days from the determination of withdrawal. In addition, refunds must be returned to the appropriate fund from which they were received.
The number of unusual factors involved in the R2T4 calculation are far too many to discus in this presentation. We would suggest that appropriate financial aid leaders take time to review Volume 5 of the Student Aid Handbook regarding “Withdrawals and Return of Title IV Funds.”
Let’s look a little closer at some of these issues:
Failure to Make Timely Payments of Credit Balances
Frequently, there is a failure to understand that any funds credited to the student’s account that exceed the amount of institutional charges for the payment period, creates a credit balance, which is the student’s money.
A credit balance must be paid to a student within 14 days of the receipt of the money, and the procedure used to pay a credit balance must be written as a policy. There must also be some documentation, such as a cancelled check or digital conformation of a funds transfer to the student’s account to prove that the payment of the credit balance was made.
Failure to follow the requirements of paying credit balances to students in a timely manner can lead to the institution being placed on cash management restrictions.
Failure to Advise Students When Loan Funds are Received
In an institution’s haste in posting loan funds to a student’s account the required notifications are often overlooked. There is discussion on general notifications in the Student Aid Handbook, Chapter 2 page 4–21, and it would be wise for readers to review.
The general notification requirement states that a school must notify a student of the amount of funds the student and his or her parent can expect to receive from each Federal Student Aid (FSA) program, including Federal Work Study, and how and when those funds will be disbursed. This notice must be sent before the disbursement is made. The notice must give the student and/or parent the right to cancel the loan(s).
Many institutions meet this requirement by providing the student a detailed award notice with dates of disbursements and right to cancel stated on the face of the notice.
Failure to Validate Standards of Academic Progress (SAP) Before Disbursement of Funds
Regulations require institutions to validate that a student is making academic progress before disbursing funds. When a student fails to meet Standards of Academic Progress (SAP), he or she is not eligible to receive the funds; therefore, making a disbursement without adequate validation could be a violation of standards and the institution would be required to repay those funds. The process is often easy to overlook because in the haste to record the funds to the student’s account, the review process is overlooked.
All the above events are determined by the U.S. Department of Education as “Administrative Capability,” and any failure could have repercussions for the institution.
