FINANCIAL AID - FEDERAL

CHAPTER30

FINANCIAL AID - FEDERAL

300.2

1.0OVERVIEW AND DEFINITIONS:

Sections 1.1 and 1.2 are generallyfrom the Financial Aid website. For the most up-to-date information,please visit the Financial Aid Programs website.This chapter will focus on Financial Aid funded by the Federal Government.

1.1 Introduction

Financial aid programs provide support for students to help meet the costs of obtaining a college education. Funding for financial aid programs is provided by the federal government, state governments, colleges and schools, and a variety of other public and private sources. There are two main categories of aid, differentiated primarily by the basis upon which they are awarded:

  • Achievement-based aidis awarded to students who have a special characteristic, skill, talent, or ability. Typically achievement-based aid is in the form of scholarships.
  • Need-based aid is provided to students who demonstrate financial need. Most financial aid, particularly public-funded aid, is awarded on the basis of financial need determined through the application process and in accordance with a prescribed federal formula.

Financial aid is available in four basic types of programs.

  • Scholarships are "gift aid" which does not have to be repaid. Scholarships typically include criteria such as academic performance or special talents.
  • Grants are "gift aid" and generally do not include criteria other than financial need.
  • Work-study is a "self-help" program in the form of part-time employment during the student's college career.
  • Loans are a form of "self-help" since they represent borrowed money that must be paid back over a period of time, typically after the student leaves school. Federal Direct Student Loans can be either subsidized or unsubsidized. When a loan is subsidized the loan doesnot accrue interest so long as the student is enrolled at least half-time in school. When a loan is unsubsidized the loanaccrues interest and the interest is capitalized.Interest on unsubsidized student loans can be paid while inschool to avoid capitalization. If the student’s enrollment drops below half-time, the student begins their six-month grace period for both subsidized and unsubsidized loans. Once the six-month grace period ends the student enters the repayment period.
  • Veterans’ Aid can come in the form of work-study, California Vet Fee Waiver, tuition assistance and financial aid and can help vets and active duty servicemen and servicewoman pay for school.

Student Lending – Code of Conduct

Each CSU campus abides by a Code of Conduct that addresses its relationship with providers of educational loans. Click here to see the Code of Conduct.

1.2 Federal Financial Aid Programs

Federal financial aid programs provide most of the funding currently available for student financial aid. The following are the primary federal programs through which CSU students receive aid.

  • Federal Supplemental Educational Opportunity Grants (FSEOG)
  • Federal Pell Grant
  • Federal Work-Study Program (FWS)
  • Federal Perkins Loan
  • William D. Ford Federal Direct Loan Program (Direct)
  • Federal Stafford Subsidized Loan
  • Federal Stafford Unsubsidized Loan
  • Federal Parent Loan for Undergraduate Students
  • Federal PLUS Loan for Graduate Students

The Department of Education's Student Financial Aid website provides more comprehensive descriptions of these programs.

For questions regarding financial aid programs, campuses should first contact their campus financial aid office for assistance.

FUND SPECIFICS:

2.1 FIDUCIARY– AGENCY FUNDS

Student Loan Funds

2.1.1CSU Fund 403, Perkins Loans: The Perkins Loansprogram is a federal program that provides low-interest loans (5%) for eligible undergraduate and graduate students, with preference to students with exceptional financial need. There are no fees charged on the loan. The federal government pays the interest while the student is enrolled at least half-time. There is a 9-month grace period to repay the loan after the student graduates, withdraws from school, or when enrollment drops below half-time. Aggregate loan limits are $27,500 for undergraduate students and $60,000 combined for undergraduate/graduate or professional study.

Authority: EC 89721(b) andestablished via Financial Aid Regulations.

2.1.2 CSU Fund 406,Nursing Student Loans (NSL)-Graduate: Used to record nursing student loans provided to graduate nursing students. The campus must have a written agreement with the Secretary of Health and Human Services. The loans are mostly federally funded. The institutions are responsible for the administration and the detailed management of NSL funds. Campuses are responsible for selecting the students.

Authority: EC 89721(b) andestablished via Financial Aid Regulations.

2.1.3 CSU Fund 407,Nursing Student Loans (NSL)-Undergraduate: Used to record nursing student loans provided to undergraduate nursing students. The campus must have a written agreement with the Secretary of Health and Human Services. The loans are mostly federally funded. The institutions are responsible for the administration and the detailed management of NSL funds. Campuses are responsible for selecting the students.

Authority: EC 89721(b) andestablished via Financial Aid Regulations.

2.1.4 CSU Fund 410, Federal Direct Student Loans: Used to record loans obtained directly from the Department of Education with funding from the U.S. Treasury. There are three types of low-interest, long-term loans under this program: (1) Federal Stafford Subsidized Loan (only available to undergraduate students startingtheir academic career in 2012-13 or later, (2) Federal Stafford Unsubsidized Loan (available to both undergraduates and graduates), and (3) Federal Parent Loan for Undergraduate Students (PLUS) (available to both undergraduates and graduates). All loans are government-insured, except for unsubsidized loans.

Authority: EC 89721(b) andestablished via Financial Aid Regulations.

2.2 FIDUCIARY – PRIVATE PURPOSE FUNDS

Financial Aid Funds

2.2.1 CSU Fund 401,Federal Supplemental Education Opportunity Grants (FSEOG): Used to record the Supplemental Education Opportunity Grant (SEOG), federally-funded grant assistance for undergraduates with the greatest financial needs. These federal grants range from $100-$4,000. First priority is given to students with lowest expected family contributions who receive a Pell Grant and who apply by the applicable deadline. The student must be enrolled in a minimum of 6 units to receive the award.

Authority: EC 89721(b) andestablished via the Grantor Agreement.

2.2.2 CSU Fund 408, Pell Grant Program: The Pell Grant program is a federally-funded grant that provides the foundation in the undergraduate's financial aid "package" to which other financial aid may be added. Awards are based on a student’s financial need and on enrollment status. The Governmental Accounting Standards Board (GASB) Statement No. 19 requires that Federal Pell Grants be recorded as restricted funds. GASB No. 19 states that the institution is responsible for evaluating a student’s requests for aid based on federal government criteria. If a student is eligible, the institution grants the scholarship and administers the disbursement of the grant.

Authority: EC 89721(b) and established via Financial Aid Regulations.

2.2.3 CSU Fund 409, College Work-Study Program: Used to record funding and related expenses for the federally funded program that provides both on- and off- campus jobs for eligible undergraduate and graduate students through private or public non-profit organizations, local school districts, and other local, state, or federal agencies. Private sector employers may hire Federal Work Study(FWS) students if the employer provides jobs related to the student's course of study or career objective. This fund can also be used for the work study program that is not federally funded.

Authority: EC 89721(b) and established via Financial Aid Regulations.

2.2.4 CSU Fund 411,ACG/SMART Grants: Used to record the Academic Competitiveness Grant (ACG) and National Science and Mathematics Access to Retain Talent (SMART) grants which are federallyfunded. ACG grants are for freshmen & sophomores and SMART grants are for juniors & seniors. Students must be eligible for the Pell grant to receive AGC & SMART. This fund was inactivated on July 1, 2014,effective fiscal year 2014/15.

Authority: EC 89721(b) and established via Grantor Agreement.

2.2.5 CSU Fund 412, Federal Teach Education Assistance Grant: Used to record the Federal Teacher Education Assistance College and Higher Education (TEACH) grant to assistance students who sign an agreement to meet specific teaching requirements, including working as a paid full-time teacher in a high-needs field and serving low-income students. Assistance recipients must teach for four academic years within eight years of completing program study. If recipient does not satisfy this requirement, all TEACH Grants must be repaid as direct unsubsidized loans, with interest cumulative from the date the grant was first disbursed.

Authority: EC 89721(b) and establishedvia the Grantor Agreement.

2.2.6 CSU Fund 413, Miscellaneous Federal Financial Aid Grants: Used to record funds received in connection with federal financial aid grants for which no specific fund has been established. The fund was created to differentiate between federal financial aid grants and nonfederal financial aid grants.

Authority: EC 89721(b) and establishedvia the Grantor Agreement.

3.0FUND MANAGEMENT AND ACCOUNTING PRACTICES:

3.1Unique FIRMS Object Codes

503101 - Federal Supplemental Educational Opportunity Grant Program(CSU Fund 403)

503102 -Perkins Contribution(CSU Fund 403)

503103 - Nursing Contribution(CSU Funds 406, 407)

503104 - Federal Pell Grant(CSU Fund 408)

503105 - College Work Study-Federal(CSU Fund 409)

503106 - Federal Direct Student Loans(CSU Fund 410)

503111 - Other Federal Financial Aid Grants(CSU Funds 411, 412, 413)

580097 - Federal Financial Aid Admin Allowance

For a complete list of valid object codes, refer to the Legal Edits Table (see link provided in Section 7.0, Resources).See also the Table of Object Code and CSU Fund Definitions.

3.2FIRMS Edit Table

During the FIRMS data validation process, campus data will be checked to verify that only financial aid object codes are being used in the funds referenced in this chapter. See Chapter 3, FIRMS, for further information about the Legal Edits Table, which validates combinations of CSU fund and object code.

3.3Interest on Federal Financial Aid

Periodically, the Department of Education will conduct a review of a campus’s administration of the programs authorized pursuant to Title IV of the Higher Education Act of 1965, as amended, 20 U.S.C. §1070 et. Seq. (Title IV, HEA programs). The goal of their reviews is to determine compliance with the statutes and federal regulations as they pertain to the institution’s administration of Title IV programs. The review generally consists of, but is not limited to, an examination of the campus policies and procedures regarding institutional and student eligibility, individual student financial aid and academic files, attendance records, student account ledgers, and compliance with consumer information requirements.

As a result of recent Department of Education program reviews(for the fiscal year 2013) at some of the campuses, the issue of paying the federal government for investment earningswas considered. Since implementation of the Revenue Management Program (RMP), the campuses have been instructed not to reimburse the federal government for investment earnings Per the Federal Cash Management Improvement Act of 1986,the state pays interest on federal funds on behalf of all state agencies as part of the budget process. CSU, therefore, does NOT have to pay interest on federal funds.

Per the Cash Management Improvement Act of 1990, each state must submit an annual Treasury-State Agreement (TSA) to the Federal Department of Treasury. The TSA states the interest calculation methodology and identifies the federal assistance programs (or covered programs) that are part of the agreement. If the federal agency is part of the TSA, then the campus does not have to pay the federal government interest earned on the funds as it has already been covered (paid) by the state. If the federal agency is not on the list, then the campus either pays the interest or there may be instructions as part of the agency agreement as to how to account for the interest earned. For example, on the Perkins Loan Agreement, the interest earned goes back into the pool of funds available for loans.

Campuses should review the listfrom the URL below to confirm if any campus programs are included in the Catalogue of Federal Domestic Assistance (CFDA) Programs and are thereby exempt from interest being reimbursed to the federal government.

Campuses may also choose to use the CFDA Home Page to search by program number.

3.4Federal Financial Aid Handbook

The Federal Student Aid Handbook, via the Information for Financial Aid Professionals (IFAP) website, connects the user to guidance, resources and systems needed to conduct the business of Federal Student Aid. This Handbook is primarily utilized by the campus Financial Aid Office. From time to time, specific information and updates will be included in this section of the Legal Manual that may be relevant to campus accounting and reporting offices for informational purposes.

3.5 Financial Aid Refunds to Students - CSU Direct Deposit Modification

In February 2018 the “message” in PeopleSoft (Student Financials) related to authorizing EFT, as shown below, was updated to ensure compliance with the regulations stated in Federal Student Aid Handbook. This newly revised language was reviewed by both the financial aid and legal counsel offices and the Chancellor’s Office and communication to the Student Financials group.

“I hereby authorize in accordance with the rules and regulations of the National Automated Clearinghouse Association ("NACHA") California State University XX to credit any reimbursements due to me via automated clearinghouse electronic fund transfer ("ACH") to the bank and bank account owned by me referenced above. This authorization will remain in effect until cancelled in writing. A new authorization must be completed if I change my bank account, close my bank account, or change financial institutions.

Note: I understand that CSUXX requires ten (10) business days to set up this initial authorization and two (2) business days for funds to become available following an ACH electronic funds transfer.”

3.6Disbursement of Title IV Higher Education Act Program Funds

Effective July 1, 2016, the United States Department of Education (DoE) amended Subpart K – Cash Management of the Student Assistance General Provisions regulations issued under the Higher Education Act of 1965 (HEA). These regulations govern the ways that an institution requests, maintains, disburses and otherwise manages title IV, HEA program funds. In order to ensure compliance with the changes, all campuses must post the total awarded amount of title IV, HEA program funds to the student’s ledger, pay tuition, fees, and other allowed charges and disburse any credit balance directly to the student utilizing campus funds prior to drawing down funds from the DoE. Disbursement of any credit balance occurs the date an electronic funds transfer is initiated or a paper check is mailed. Once either disbursement method takes place, a campus may then draw down title IV, HEA program funds through the DoE website to reimburse itself. See embedded memo dated December 1, 2016 from Robert Eaton, AVC, Financing, Treasury and Risk Management.

4.0REPORTING REQUIREMENTS:

4.1 Federal Financial Aid and the A-133 Single Audit

The Single Audit Act Amendments of 1996 was enacted to streamline and improve the effectiveness of audits of federal awards and to reduce the audit burden on states, local governments, and not-for-profit organizations (NPOs). OMB Circular A-133 stated that nonfederal entities that expend $500,000 or more of federal awards in a fiscal year should have a single audit. The Uniform Guidance (2 CFR part 200, subpart F) was issued in 2013 to replace Circular A-133, and is effective for Federal awards received after December 26, 2014.

To learn more about the Single Audit, please see GAAP Manual Chapter 15,Preparing for a Single Audit under the Uniform Guidance. Also see the training presentationsentitledSingle Audit (links to training include in below section 7.0).

4.2 Perkins Loans – Refund of Excess Federal Funds

Annually, campuses are required to make a calculation, referred to as the Perkins Excess Liquid Capital Calculation, to determine any excess federal funds held under the Perkins Loan program and to refund such excess to the federal government. Campuses should charge 503102, Perkins Contribution, for these refunds. In any given year this may result in an abnormal balance in the revenue account if the refund exceeds the federal contributions for that year.

At the option of acampus, the refunds can be segregatedfrom the federal contributions through the establishment of a PeopleSoft contra-revenue account. This will not be done at the system level as only the net is required for reporting purposes.

The return of Perkins Excess funds calculation result can be the combination of the Federal portion and the institutional match. The institutional match should be returned to the source fund that provided the matched funding. If the source fund is unknown, the assumption can be made that the institutional match was provided from tuition and fees and that the transfer from CSU fund 403 should be to CSU fund 485 using the applicable transfer in / transfer out FOCs.

4.3Tax Reporting – 1098T

Annually, campuses must provideIRS Form 1098-T to any student who paid "qualified educational expenses" in the preceding tax year. Qualified expenses include tuition, any fees that are required for enrollment, and course materials the student was required to buy from the school. These forms are completed by the Financial Aid office. Any questions pertaining to the law governing the issues of 1098-T’s can be addressed to Bryn Siegel ().

4.4 Perkins Loans –Portfolio Liquidation

Campuses should credit 109001 – Student Loans Receivable and debit 503102, Perkins Contribution when returning their portfolio to the Department of Education. The institution loses all rights and title to the institutional contribution upon liquidation. In the year the campus chooses to liquidate, the campus should review their Perkins CSU fund 403 trial balance to ensure that the final set of journal entries closes the trial balance entirely.