AwardYear: 1996-97 EnterChapterNo: 4 EnterChapterTitle: Federal Pell Grant Program SectionNumber: 6 SectionTitle: Overpayments and Overawards PageNumbers: 67 - 72 OVERPAYMENTS A Pell overpayment occurs any time the student receives a payment that is greater than the amount for which the student is eligible. Examples of the four most common types of overpayments are given below. [[Types of overpayment]] 1. Student error, such as failing to report the spouses income on the application. 2. School error, for instance, when a students award is taken incorrectly from the Payment Schedule, or when the school pays a student who is not making satisfactory progress. 3. Required recalculations, such as when a student never begins attending class or does not begin attending all of his or her classes, or withdraws from school after receiving a disbursement for living expenses. (See Refunds and Repayments in Chapter 3 for repayment calculation.) 4. Optional payments, for instance, when the school makes an interim disbursement to a student selected for verification, but the student never completes verification. [[34 CFR 690.79(a)(2)]] No matter what the reason for the overpayment, it must be repaid. If the overpayment is the result of a school error or an optional payment, the school must repay the Pell account whether or not it succeeds in collecting the overpayment from the student. [[Continuing payments after overpayment]] If a school has made an overpayment to a student, it may continue to make payments to that student under certain circumstances: - The overpayment can be eliminated within that award year by reducing the students subsequent Pell payments during the award year; - The school repays the overpayment itself. The student would then owe an institutional debt, not a Pell overpayment, and would be eligible for further Pell payments; [[NEW]] - The student makes arrangements to repay that are satisfactory to the school. Previously, if the overpayment was the schools fault, a student could continue to receive aid if he or she agreed to repay the overpayment within six months. Effective July 1, 1996, a student may continue to receive aid if he or she makes arrangements to repay that are satisfactory to the school; - The student completely repays the overpayment. Note that if the overpayment is due to the schools error, the school is required to repay the overpayment if it cannot collect the overpayment from the student. As noted above, once the school repays the overpayment, the student is eligible for further aid. If the overpayment is not the schools fault (for instance, the student made a mistake on the application, or the school had no information indicating that the student attended another school), the school may, but is not required to, repay the Pell account for the student. If the school does not repay the overpayment, and the student will not agree to repay, the school is not liable to the Department, but must make a reasonable effort to contact the student and collect the overpayment. Note that school may not reduce a students Pell award from the current award year to eliminate a Pell overpayment from a previous award year. For example, if a student received an overpayment in 1995-96, a school may not reduce any portion of the students 1996- 97 Pell award to eliminate the overpayment. FINANCIAL AID TRANSCRIPTS If a student transfers from School A to School B and receives an overpayment at School B because School A completed the students financial aid transcript improperly, School A may be subject to a fine or other adverse action. School B will not be liable for the overpayment but is responsible for attempting to collect it from the student. [[34 CFR 668.19(a)(3)(ii)]] If School A requests a financial aid transcript from School B but has not received it, School A may make a Pell disbursement to the student for only one payment period. School A would not be liable for an overpayment unless it made payments for more than one payment period. [[School has closed]] If School B cannot obtain a financial aid transcript from School A because that school has closed, School B may request assistance from the Department by writing to-- Federal Student Aid Information Center Financial Aid Transcript Request P.O. Box 4129 Iowa City, Iowa 52244 (See Chapter 3, Section 4 of this handbook for more information on financial aid transcripts.) REPORTING OVERPAYMENTS COLLECTED If a school collects or repays an overpayment for the current award year, it reports the decrease in the students award using its normal reporting method (EDE, RDE, or Floppy Disk Data Exchange). The school may also use these methods to report a decreased award after the general September 30 payment data submission deadline; for the 1996-97 award year, decreased award reports will be processed at least through January 31, 1998. [[Reporting an award decrease after September 30]] For reporting decreases after September 30, the school may also use the Decrease Award Report, provided in Dear Colleague Letter P-95-5, dated October 1995. The school should use a separate report for each award year for which it needs to report an award reduction; the schools total Pell expenditure figure must always be included. The business office must also report its corrected total Pell expenditure figure on its Federal Cash Transaction Report (ED/PMS 272A) (see the instructions in Chapter 6 of the Recipients Guide to the Payment Management System). [[Overpayments from a prior year]] If a student repays a Pell overpayment for a prior award year, the school must deposit the funds in its institutional federal funds or Pell account and report the decrease in the students award to the Federal Pell Grant Program. The funds can then be used for current year disbursements. At the same time the school reports the decrease to the Federal Pell Grant Program, it must also report the decrease to its total Pell expenditures for the prior award year on the ED/PMS 272A. See Section 7 of this chapter for more information on reporting decreased awards. PROBLEMS IN COLLECTING OVERPAYMENTS [[Referrals to the Department]] The school must notify the Departments Debt Collection Service (DCS) if it has serious difficulty in collecting an overpayment from a student: for example, if the school cannot contact the student or the student is uncooperative, or if the school establishes a repayment plan and the student refuses to pay or discontinues payments. If the school is unable to recover or eliminate an overpayment that is not the schools fault, the school must refer the students case to DCS for collection. (Referral procedures for overpayments are discussed in the Verification Guide.) [[Effect on eligibility for other SFA Programs]] After the Department has received the schools information, collected the overpayment from the student (if possible), and resolved the case, it will notify the school by letter of the results. Please note that until the Department has reached a final resolution of the referred case, the school may not make any further payments to that student under any SFA Program. [[NEW]] A student who owes a Pell overpayment that has been reported to the Department and who subsequently submits a FAFSA will be informed that he or she is not eligible for additional federal aid until the overpayment is repaid in full. Beginning with the 1996-97 award year, NSLDS will show for all such students that a Pell overpayment is owed to the Department. A C will be printed on the SAR next to the EFC to indicate that the school must resolve the issue before paying the student. PREVENTING OVERAWARDS The Pell is regarded as the first source of assistance to the student and thus is not adjusted to take into account other aid, even if the students combined aid package exceeds the students need.*1* [[Adjusting campus-based aid]] The aid administrator is responsible for preventing an overaward by adjusting the aid the school controls. For example, if the student is receiving campus-based aid in addition to a Pell, the campus-based aid must be adjusted to prevent an overaward. The sum of the students EFC, Pell, campus-based aid, and any other aid and resources may not exceed the students COA. (See Chapter 2.) [[The example on page 4-71 is currently unavailable on the SFA BBS. Please reference your paper handbook for additional information.]] As mentioned in Section 4, if the students aid package includes a loan and the package must be adjusted to prevent an overaward, the Pell may not be used to pay back the loan--a loan repayment does not constitute an educational expense. [[Estimated financial assistance]] In addition to adjusting any campus-based aid, schools are required to include an estimate of the students Pell eligibility as part of the students estimated financial assistance (EFA) when certifying a Federal Stafford or Direct Loan application. (See Chapter 10 for further information.) On April 26, 1996, President Clinton signed the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (P.L. 104- 134), which increased the maximum Pell for the 1996-97 award year to $2,470. The Department published revised Payment and Disbursement Schedules based on the new amount in May, replacing the original schedules published in February. Schools that used the original schedules to estimate the amount of Pell to include in the students EFA before June 1, 1996, are not required to recalculate loan amounts based on the this estimate. In addition, the Department will not consider any extra loan amount (up to $30) to be an overaward if this extra amount is the result of the increase in the maximum award from $2,440 to $2,470. Note that schools must recalculate loans for students who were ineligible and became eligible only because of the increased maximum. (See Appendix E for the revised Payment and Disbursement Schedules.) [[NCAA rules for student athletes]] The National Collegiate Athletic Association (NCAA) has rules limiting the amount of aid student athletes may receive. However, the law does not permit schools to adjust students Pells. STUDENT ATHLETES MUST RECEIVE THE FULL AMOUNT OF ANY PELL FOR WHICH THEY ARE ELIGIBLE. If the students potential aid plus the students Pell exceeds the NCAA limits, the school must reduce any aid over which it has control, NOT the Pell. *1* Although a Pell could be adjusted if the student received funds under the National Science Scholarship Program or the Paul Douglas Teacher Scholarship Program, neither of these programs have been funded for the 1996-97 award year (see Chapter 9). |