The U.S. Department of Education (ED) recently held its 2016 Federal Student Aid Training Conference in Atlanta. Among many topics discussed during the conference, the following items are the key takeaways to consider for the upcoming award year.

New Direct Loan Borrower Defense Regulations

The new direct loan borrower defense regulations have been published and are effective for loans issued on or after July 1, 2017. The new regulations provide borrowers relief from student loan debt in situations where there was “a substantial misrepresentation by the school about the nature of the educational program, the nature of financial charges, or the employability of graduates.” Institutions should review all published information provided to current and prospective students to ensure there are no discrepancies that could put the institution at risk.

Other key changes that will affect institutions include updated financial responsibility requirements. Schools should review and consider all the triggering and early-warning events defined in the regulation, such as events that affect an institution’s financial standing, 90/10 violations, lawsuits that reach summary judgments, fluctuations in Title IV federal student aid amounts, high annual dropout rates and accreditation risks. Additional disclosure requirements are also included in the regulations aimed to ensure students make more informed decisions. If triggering events at an institution require financial protection to be provided to ED, then institutions may need to disclose this information to students. Propriety institutions may also be required to publish additional disclosures if they have poor loan repayment results.

2017-2018 Early FAFSA

The Free Application for Federal Student Aid (FAFSA) process is changing starting with the 2017-2018 award year. Information included in the FAFSA will now be from one year earlier, referred to as “prior-prior year” or “PPY.” With the implementation of PPY, both the 2016-2017 FAFSA and 2017-2018 FAFSA will include 2015 income and tax information. To minimize the possibility of conflicting information, ED recommends using the IRS Data Retrieval Tool for both FAFSA years. It falls to the institution to resolve any conflicting information that is identified on the student’s FAFSA.

Protecting Student Information

Cybersecurity threats continue to be a reality for all businesses, including institutions of higher education. The growing reliance on a paperless environment and the increased threat of data breaches force institutions to keep the importance of protecting student information at the forefront of their control environment.

Institutions are subject to the Gramm-Leach-Bliley Act (15 U.S. Code § 6801)(GLBA) as noted in your institution’s Program Participation Agreement (PPA). Under GLBA, institutions are required to, among other things:

• Develop, implement, and maintain a written information security program;
• Designate the employee(s) responsible for coordinating the information security program;
• Identify and assess risks to customer information;
• Design and implement an information safeguards program;
• Select appropriate service providers that are capable of maintaining appropriate safeguards; and
• Periodically evaluate and update their security program.

Federal Perkins Loan Program Update

As it stands, the Federal Perkins Loan Program is scheduled to expire on Sept. 30, 2017. Currently, there is no requirement for an institution to liquidate its Perkins Loan portfolio and Revolving Fund as part of the expiration of the program; however, ED recommends that institutions begin the process of reconciling their Perkins Loan portfolio and ensuring that the National Student Loan Data System (NSLDS) accurately reflects the institution’s portfolio. Now is the time for institutions to assess their portfolio and consider how many loans remain open as well as accounting for the remaining Perkins Loan Revolving Fund. If your institution is considering liquidation, there are additional audit requirements.

Return of Title IV (R2T4) Calculations

Institutions should consider their process for R2T4 calculations to ensure they are in compliance. These calculations are on ED’s Top 10 listing for both program reviews and compliance findings. Particular attention should be focused on the treatment of leaves of absence (LOA).

The general consensus at the conference was that a true LOA as defined by ED is rare. In order for a student to go on an approved leave of absence, he/she must re-enroll in the same classes at the same point that he/she last attended. This requirement would limit many students from taking a LOA as many courses are not offered throughout the year, thereby not allowing them to re-enter with the same schedule.

Transfer Students

A useful tool available to institutions through the NSLDS website is the Transfer Monitoring List. It is a best practice to use this tool in monitoring the student’s eligibility for Title IV FSA. Assuming the tool is used properly and a transfer student is subsequently found to be ineligible, the onus to repay the over award is placed on the student. Additionally, this would preclude the overpayment from being included as a finding on the institution’s audit report.

Modules

A common misconception among financial aid professionals is that their institution does not offer modules; however, should your institution offer an accelerated winter session or summer sessions you are most likely using modules. The most common modules present themselves during summer terms where institutions often offer multiple terms (e.g., Summer 1, Summer 2 and Summer 3). Accelerated sessions or Intersessions are not treated as separate terms like the summer session discussed above, rather they are added to a standard term. This will create modules, one being the standard term and the other being the intersession. For more information on modules, refer to the Federal Student Aid Handbook Volume 3, Chapter 5.

Satisfactory Academic Progress (SAP) Policies

SAP policies typically focus on the quantitative and qualitative standards of grade point average and pace of progression; rightfully so, as these are the focal points of the policy. However, there are other factors that must be included in your institution’s SAP policy. The policy must consider the treatment of repeated coursework, withdrawn courses and incomplete courses and how they impact the qualitative and quantitative measurements. In addition, accepted transfer credit must count as both hours attempted and complete. While there are no specific regulations addressing nonaccepted credits, it is a best practice for institutions to include the treatment of these credits in their SAP policy. The point of focus regarding SAP policies is that institutions have a degree of leeway but all the necessary components must be addressed.

For More Information

These topics will hopefully provide your institution with some key takeaways to think about during 2017 as it relates to Federal Student Financial Aid. If you have questions regarding your organization’s compliance, please contact us.

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