Federal Student Aid - IFAP
   
AwardYear: 1995-1996
EnterChapterNo: 4
EnterChapterTitle: Federal Pell Grant Program
SectionNumber: 6
SectionTitle: Overpayments and Overawards
PageNumbers: 85-89



[[Types of overpayments]]
An overpayment of a Pell 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.

1. Student error, such as failing to report the spouse's
income on the application.

2. School error, for instance, when a student's award is
taken incorrectly from the Payment Schedule, or when the
school pays a student who is not making satisfactory
progress.

3. Required recalculations, 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 cash
disbursement for living expenses. (See "Refunds and
Repayments" in Chapter Three of this handbook 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.

No matter what the reason for the overpayment, it must be
repaid by the student, or the school must otherwise resolve the
overpayment. In addition, 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.

[["Hold file"]]
A student who owes an overpayment on a Pell that has been
reported to the Department and who subsequently submits a
FAFSA will be informed that the application cannot be
processed because of the overpayment, and that the student is
not eligible for additional federal aid until he or she repays in
full the amount owed. An EFC will not be calculated for such
a student. The student's application is considered to be in a
"hold file."

OVERPAYMENTS

If a school has made an overpayment to a student, it may
continue to make payments to that student under certain
circumstances:

The overpayment is due to the school’s error--The school may
continue to make Pell payments to the student if the student
acknowledges the overpayment in writing and agrees to repay it
within six months, or if the overpayment can be eliminated
within that award year by reducing the student's subsequent Pell
payments during the award year. Of course, the student must
still meet all other eligibility criteria in order to receive
payment.

The overpayment is not the school’s fault-For instance, the
student may have made a mistake on the application.*11* Or,
the school may have had no information in its records
indicating a student had ever attended another school and made
an award that resulted in an overpayment. In cases such as
these, the school may continue to make Pell payments to the
student if the school can reduce the student's subsequent Pell
payments to eliminate the overpayment in that award year. IF
THE OVERPAYMENT CANNOT BE ELIMINATED IN
THIS WAY, THE SCHOOL MAY NOT MAKE FURTHER
PELL PAYMENTS TO THE STUDENT UNTIL HE OR SHE
COMPLETELY REPAYS THE SCHOOL. If the student will
not agree to repay, the school is not liable to the U.S.
Department of Education, but must make a reasonable effort
to contact the student and collect the overpayment.

NOTE: A school may not reduce a student's Pell award from
the current award year to eliminate a Pell overaward from a
previous award year. For example, if a student received an
overaward in 1994-95, a school may not reduce any portion of
the student's 1995-96 Pell award to eliminate the overaward.

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
student's 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.

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 U.S. Department of Education by
writing to-

Federal Student Aid Information Center
Financial Aid Transcript Request
P.O. Box 4129
Iowa City, Iowa 52244

See Chapter Three, Section Four of this handbook for more
information.

Overpayments Collected

[[Overpayments from a prior award year]]
If a student repays a Pell overpayment for a prior award year,
you must deposit the funds in your institutional federal funds
or Pell account and report the decrease in the student's award
to the Federal Pell Grant Program (see Section Seven of this
chapter). The funds can then be used for current year
disbursements. At the same time you report the decrease to the
Federal Pell Grant Program, you must also report the decrease
to your total Pell expenditures for the prior award year on the
Federal Cash Transaction Report (ED/PMS 272A)-see the
instructions in Chapter 6 of the Recipient's Guide to the
Payment Management System.

[[Reporting an award decrease after September 30]]
If you need to report a decrease in a student's Pell award to
the Federal Pell Grant Program after the September 30 student
award data submission deadline, you may use the "Decrease
Award Report," provided in "Dear Colleague" Letter P-94-6,
dated November 1994. You may also use your own stationery,
if you choose. You report downward adjustments to a
student's Federal Pell award under the following conditions:

- An award on the Student Payment Summary is greater than
the award disbursed, and the student's true award amount
must be reported.

- The student received an overpayment because of an
institutional error or optional payment, and you must report the
student's true award amount. (You must report the true award
amount regardless of whether the student has repaid any part
of the overpayment.)

- The student received an overpayment because of a student
error or change in attendance or costs, the student has repaid
all or part of the overpayment, and you must reduce the award
amount on file by the amount of the overpayment that has been
repaid.

You should use a separate report for each award year that you
need to report an award reduction; always include your
school's total Pell expenditure figure. The business office must
also report its corrected total Pell expenditure figure on its
ED/PMS 272A.

Problems in Collecting Overpayments

[[Referrals to the Department]]
The school must notify the Department's Debt Collection
Service 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 school's fault, the
school must refer the student's case to the Debt Collection
Service for collection. (The referral procedures for
overpayments are discussed in the Verification Guide.)

[[Effect on eligibility for other SFA programs]]
After the Department has received the school's 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. (Note that you
must report the overpayment on the student's financial aid
transcript.)

Similarly, if the student owes a repayment on other SFA grants
or is in default on SFA loans, that student would also be
ineligible for a Pell. The general eligibility rules for students in
default or overpayment status are discussed in Chapter Two,
Section One.

PREVENTING OVERAWARDS

[[NSSP/Douglas scholarships cannot be reduced]]
The Pell is generally regarded as the first source of assistance
to the student and thus is usually never adjusted to take into
account other aid, even if the student's combined aid package
exceeds the student's need. However, any funds awarded the
student under the National Science Scholarship Program
(NSSP) and the Paul Douglas Teacher Scholarship Program
(Douglas scholarship) may not be reduced because the student
receives other forms of federal student aid-including a Pell.
This statutory provision is discussed in Chapter Nine of this
handbook.

[[Adjusting campus-based aid]]
Note that a Pell may not be adjusted when combined with any
aid other than an NSSP scholarship or Douglas scholarship.
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 student's EFC, Pell,
campus-based aid, and any other aid and resources may not
exceed the student's COA.

[[ The example on page 4-89 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

As mentioned in Section Four, if the student's 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 student's Pell eligibility as
part of the student's "estimated financial assistance" when
certifying a subsidized Federal Stafford Loan application. (See
Chapter Ten of this handbook for further information.)

[[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 except in the two circumstances described previously.
STUDENT ATHLETES MUST RECEIVE THE FULL
AMOUNT OF ANY PELL FOR WHICH THEY ARE
ELIGIBLE. If the student's potential aid plus the student's Pell
exceeds the NCAA limits, the school must reduce any aid over
which it has control, not the Pell.

*11* Note that in cases where the overpayment is the result
of an error on the SAR or ISIR, the overpayment is the
difference between the amount the student was eligible for,
based on correct information, and the amount the student was
actually paid.