EnterChapterTitle: William D. Ford Federal Direct Loan Program
SectionTitle: School Responsibilities
Institutional responsibilities under the Direct Loan Program largely,
but not entirely, focus on the items basic to "booking" a loan (the
loan origination record, promissory note, and disbursement record).
Responsibilities and procedures associated with these items vary
depending on the school's origination level. Origination levels, their
corresponding functions, and procedures for requesting and
maintaining Direct Loan funds are covered in the Department's
Direct Loan School Guide. For information applicable to all schools
on requesting and maintaining SFA funds, see Chapter 3.
To help schools understand other requirements and procedures
necessary to administer the Direct Loan Program, the Department
provides Direct Loan publications in addition to the Direct Loan
School Guide and conducts training with accompanying written
materials. Information includes the Reconciliation Guide for Direct
Loans, user's guides on the Department's Electronic Data Exchange
(EDE) and EDExpress software, and trainee guides for the
Department's Direct Loan and EDExpress workshops. This section
will not repeat information covered in these materials but will focus
on schools' other Direct Loan responsibilities. For a broad discussion
of institutional responsibilities, see Chapter 3.
DETERMINING THE LOAN PERIOD
The period of enrollment or loan period is the period for which the
Direct Loan is intended. This period must coincide with one or more
of a school's academic terms (such as academic year, semester,
trimester, quarter, or nonstandard term) for schools that use terms.
Loan periods for schools that do not use terms are generally based on
the length of the program or academic year. The cost of attendance,
estimated financial assistance, and Expected Family Contribution
must relate to the loan period.
The MINIMUM period for which a school may originate a loan is
- a single academic term (at a school measuring academic progress
in credit hours and using terms), or
- the SHORTEST of the following three periods:
- the academic year, as defined by the school in accordance with
the General Provisions regulations,
- the length of the student's program at the school, or
- the remaining portion of the student's program that exceeds the
school's academic year (at a school measuring academic
progress in clock hours or measuring academic progress in
credit hours but NOT using terms).
The MAXIMUM loan period is generally the school's academic year
but cannot exceed a 12-month period.
[[Summer sessions overlapping award years]]
If a summer school session overlaps two award years (that is, begins
before July 1 and ends after July 1), the financial aid administrator
can decide to which of the two award years the loan period will
apply. This is the ONLY case in which a financial aid administrator
has such discretion. If a student in a summer school session that
overlaps two award years is also receiving campus-based aid (a
Federal Perkins Loan, a Federal Supplemental Educational
Opportunity Grant [FSEOG], or Federal Work-Study [FWS]), both
the Direct Loan and the campus-based aid must apply to the same
If a student's Direct Loan is originated after an enrollment period
begins, the loan may retroactively cover the entire enrollment period,
as long as that period does not exceed the maximum loan period
allowed. For example, suppose a school's academic term begins on
September 6 and runs through December 20. A student admitted to a
program contingent on the school's receiving an acceptable academic
transcript from a previous school begins the academic term on
September 6. The school receives the transcript on October 15. The
school may originate the loan for the full enrollment period
(September 6 through December 20). If the student plans on
enrolling for the subsequent term and that term is part of the same
academic year as the first term, the school may originate the loan to
cover the period from September 6 to the end of the second term.
[[Charging tuition and fees at the start of a program longer than an
If a school charges a student tuition and fees at the beginning of a
program that is longer than an academic year, the cost of attendance
for the Direct Loan Program should include the full amount of the
tuition and fees charged in the ENROLLMENT PERIOD in which
the loan is made. For example, suppose a school with a 1,350-clock
hour program defines its academic year as 900 clock hours and
charges each student the full $3,000 in tuition and fees at the
beginning of the program. An enrolling student may receive two
Direct Loans during the program (provided all eligibility criteria are
met) because the program exceeds one academic year. The tuition
and fees component of the cost of attendance for the first Direct
Loan is $3,000; there is no tuition and fees component in the cost of
attendance for the second Direct Loan. The second loan must be
prorated because the remainder of the program (450 hours) is shorter
than the school's academic year. See page 11-17 for more
information on loan proration.
Before disbursement, schools must take certain steps:
- The school or the Department's Loan Origination Center,
depending on the school's origination level, must have a
completed, signed promissory note from the borrower.
- The school must confirm the borrower's eligibility (see Section 1).
- If a student has received financial aid from another school, the
financial aid administrator must request a financial aid transcript
from the other school(s) or use National Student Loan Data
System (NSLDS) information to ensure the student is not in
default on an SFA loan and does not owe a repayment on an SFA
grant. Schools also must determine the borrower's outstanding
Direct Loan/FFEL balance to determine remaining eligibility. See
Chapter 2 for information on financial aid transcripts and NSLDS.
[[Notification of funds student AND parent will receive]]
- The November 29, 1996 cash management regulations state that
schools must notify students not only of the amount of SFA funds
the students can expect to receive but also the amount that
PARENTS can expect to receive. The notice must also specify
how and when students' and parents' expected SFA funds will be
disbursed. If those funds include Direct Loans, schools must
delineate in the notice which Direct Loan funds are subsidized and
which are unsubsidized. For additional school notification
requirements, see page 11-74.
[[Cash management regulations]]
For a detailed discussion of the November 29, 1996 cash
management regulations, including the new general definition of
"payment period," see Chapter 3. The discussion here covers
disbursement provisions affecting Direct Loans, including new cash
management disbursement provisions. THE REGULATIONS
SYMBOL USED IN THE MARGIN ON THE PRECEDING PAGE
WILL APPEAR NEXT TO THE NEW PROVISIONS.
[[Definition of disbursement]]
SFA funds are considered disbursed when a school credits a student's
account or pays a student or parent directly, either from SFA funds
received from the Department or from school funds labeled as SFA
funds before any SFA funds are received.
Number of Disbursements
If a school's program uses standard academic terms (semester,
trimester, or quarter) and measures progress in credit hours,
disbursements are made as follows:
- If there is only one term, a school disburses a Direct Loan in equal
amounts at the beginning of the term and at the term's calendar
midpoint. If the loan period equals one payment period and more
than half the payment period has elapsed, schools may include in
the disbursement the loan proceeds for the entire payment period.
- If there is more than one term, schools must disburse funds over
ALL TERMS of the loan period. For example, if a loan period
includes all three quarters of an academic year, the loan must be
disbursed in three equal payments, one per quarter. Previously,
quarter-based schools could have disbursed loan funds for all three
quarters in two disbursements. If one or more payment periods
have elapsed before a school makes a disbursement, the school
may include in the disbursement the loan proceeds for the
completed payment periods.
[[Clock hours/nonstandard terms]]
If a school's program measures progress in clock hours or in credit
hours without using standard terms, disbursements are made as
- A school disburses a Direct Loan in equal amounts. The school
makes the first disbursement at the beginning of the term. The
second disbursement may not be made, however, until the LATER of
- the calendar midpoint between the first and last scheduled days
of class of the loan period, or
- the date (determined by the school) that the student has
completed half the academic coursework (for credit hour
schools) or half the clock hours (for clock hour schools) in the
- If the calendar midpoint of the loan period has passed and the
borrower has completed one-half the credit hours or clock hours in
the loan period before the school makes any disbursement, the
school may disburse the loan in a single installment.
Timing of Disbursements
As discussed earlier, generally an SFA disbursement occurs when a
school credits a student's account or pays a student or parent directly,
either from SFA funds received from the Department or from school
funds labeled as SFA funds before any SFA funds are received.
However, schools may make the first Direct Loan disbursement 10
days before the first day of classes, except for first-time, first-year
undergraduates. In these cases, schools must wait until 30 days after
the first day of the student's scheduled classes. The cash management
provisions provide that a standard-term credit hour school can now
also make a second or subsequent disbursement 10 days before the
first day of classes of any subsequent term. Second disbursements for
clock hour or nonstandard-term credit hour schools are described at
the top of this page.
If a school credits a student's account with institutional funds more
than 10 days before the first day of classes, the disbursement is
considered to have occurred on the 10th day before the first day of
classes. Similarly, if a school credits the account of a first-time, first-
year, undergraduate borrower with institutional funds earlier than 30
days after classes start, the disbursement is considered to have
occurred on the 30th day after classes start.
If a school makes a credit and indicates on the account that the credit
is a Direct Loan, the school has made a Direct Loan disbursement, as
long as the timing of the credit is within the relevant periods
discussed on the preceding page. If a school makes a memo entry for
billing purposes and does not identify it as a Direct Loan credit, the
school did not make a Direct Loan disbursement.
[[Delay in attendance]]
If a student delays attending school, the school may consider the
student to have maintained eligibility for the loan from the first day
of the enrollment period.
[[Student temporarily drops below half-time status]]
If a student temporarily ceases to be enrolled at least half time before
any Direct Loan funds are disbursed, the school may still make a first
disbursement (and subsequent disbursement) if the student resumes
enrollment at least half time. The school must review the student's
cost of attendance, revising it as necessary to ensure the student still
qualifies for the entire Direct Loan amount even though the cost of
attendance may be lower. The school must document this review in
the student's file.
[[Student no longer enrolled]]
If a student becomes ineligible for Direct Loans because he or she is
no longer enrolled as at least a half time student for the loan period,
the school may still make a disbursement to that student. Certain
conditions must be met:
- The student incurred costs for the period in which the student was
enrolled and was eligible.
- If the student was a first-year, first-time borrower, he or she must
have completed the first 30 days of the program of study.
- The school must have an eligible SAR or ISIR from the student.
- The school must have created a complete, accurate loan
origination record while the student was enrolled and eligible.
The school must make the late disbursement no later than 90 days
after the date the student becomes ineligible. Note: The November
29, 1996 cash management regulations provide that schools are no
longer required to document exceptional circumstances in the
student's file for any late disbursements made from 61 to 90 days
after the student stopped attending. For a discussion of late
disbursements, see Chapter 3.
The school cannot make a late second or subsequent Direct
Subsidized or Direct Unsubsidized Loan disbursement unless the
student has graduated or successfully completed the enrollment
period for which the loan was intended.
Additional Disbursement Requirements
[[Crediting funds to student account]]
As specified in the promissory note, a school may apply Direct Loan
proceeds to the student's account without the borrower's written
authorization or acknowledgment. However, if a school applies
payment to charges other than tuition, fees, and room and board, the
borrower must provide written authorization. See Chapter 3 for more
A school that credits its students' accounts with Direct Loan funds
must post those funds directly to the account for tuition and fees and
room and board (if the student contracts with the school for room
and board). As noted above, with the borrower's written
authorization, the school may credit funds to the student's account for
cost of attendance charges other than tuition, fees, and room and
board. A school that disburses Direct Loan funds by crediting the
student's school account must use those funds for outstanding current
authorized charges before disbursing any funds directly to the
[[Credit balance paid to student or parent]]
If a school applies SFA funds to a student account and determines
that those funds exceed allowable charges, the school must pay the
student or parent the excess within 14 days of one of the following
events, whichever is LATEST:
- the date the balance occurs,
- the first day of classes of the enrollment period, or
- the date the borrower rescinds his or her authorization for the
school to hold funds or use the excess funds to cover other
[[Excess PLUS funds]]
If a student's account shows a credit balance and a Direct PLUS Loan
has been credited to the account, the school must distribute the
excess PLUS funds to the parent borrower, unless the parent has
provided written authorization allowing the school to give the funds
to the student.
A school that offers courses of study by correspondence and that
wishes to disburse Direct Loans must establish a lessons submission
schedule and give that schedule to prospective students before they
enroll. The course schedule must include
- a due date for each course lesson,
- if available, a description of any options for altering the sequence
of lesson submissions
- the course completion date, and
- the date that resident training must begin, its location, and the
timeframe for completing the resident training.
Schools must notify students or parents electronically or in writing
when crediting the student's account with Direct Loan funds. The
new cash management regulations specify that schools now must
send the notice NO EARLIER THAN 30 DAYS BEFORE, AND NO
LATER THAN 30 DAYS AFTER, crediting the student's account.
Schools must provide in the notice
- the date and amount of the disbursement,
- the borrower's right to cancel all or a portion of the loan or loan
- the procedures and time by which the borrower must notify the
school that he or she wishes to cancel.
A school that sends the notice electronically must require the
borrower to confirm receipt and must keep a copy of the
confirmation. For example, if a school notifies a borrower through
electronic mail, the school must request a "return receipt" message
and keep a copy of the receipt on file.
[[Disbursement cancellation notification]]
Borrowers who wish to cancel all or a portion of a Direct Loan must
notify the school. The school must honor the request if it is received
no later than
- 14 days after the date the school sends the notice that it is
crediting the borrower's account, or
- the first day of the payment period, if the schools sends the notice
more than 14 days before the first day of the payment period.
[[Reporting disbursement information]]
Schools must report required information on actual disbursements,
disbursement cancellations, and disbursement adjustments--within 30
days after these occur--to the Loan Origination Center. For
information on these procedures, including how to handle excess
cash, see the Direct Loan School Guide. For information on the
reconciliation process, see the Reconciliation Guide for Direct
[[Returning funds after disbursement]]
If, after making a Direct Loan disbursement, a school determines that
a student withdrew or was expelled before the first day of classes for
the loan period or failed to attend school during that period, the
school must return to the Department any loan proceeds credited to
the student's account within 30 days of the date established for the
student's withdrawal.*1* If the school disbursed loan proceeds
directly to the student, the school also must return any payments the
student made to the school, to the extent that no payments exceed the
amount of loan proceeds the school disbursed to the student.
[[34 CFR 685.211]]
If a school disbursed loan proceeds directly to a student who did not
establish eligibility for the loan, the student must repay all or part of
those proceeds, as appropriate. For example, a school disburses loan
proceeds to a student who enrolls full time. However, when the
student begins attendance, he or she is attending less than half time.
The student is an ineligible borrower and is responsible for repaying
the loan proceeds. Note that the school must notify the Department
of any amount given directly to the student.
OTHER SCHOOL RESPONSIBILITIES
Schools participating in the Direct Loan Program are required by law
to provide entrance and exit loan counseling. Exit counseling is for
all student borrowers; entrance counseling is only for first-time
student borrowers. A first-time borrower is someone who has not
previously received a Direct Subsidized Loan, Direct Unsubsidized
Loan, Federal Stafford Loan, Federal Unsubsidized Stafford Loan, or
Federal SLS Loan. A school must maintain documentation in each
student borrower's file substantiating the school's compliance with
entrance and exit counseling regulations. Note that loan counseling
requirements do not apply to parent borrowers.
This section offers an overview of counseling responsibilities. To
help schools provide complete and effective counseling, the Direct
Loan Program offers entrance and exit counseling guides for
counselors and borrowers, plus companion videos. Schools receive
annually an order form for these materials.
Schools must conduct entrance counseling before making the first
disbursement of a Direct Subsidized or Unsubsidized Loan, unless
the student is enrolled in a correspondence program--or a study-
abroad program--approved for credit at the home school. In these
cases, the home school must mail the borrower written counseling
materials before disbursing the loan proceeds.
Counseling may be conducted in person, by videotape presentation,
or by computer-assisted technology. In each case, a person
knowledgeable about SFA Programs must be available to answer
borrowers' questions after the counseling session.
Although each school and each student's situation is different,
suggestions may be useful for presenting entrance counseling's
- SCHOOLS MUST EMPHASIZE TO STUDENTS THE
SERIOUSNESS AND IMPORTANCE OF THE REPAYMENT
OBLIGATION THEY ARE ASSUMING. Schools should advise
students to read carefully the loan application, the disclosure
statement, and the promissory note containing the borrowers'
rights and responsibilities before signing any of these documents.
Because a student loan is usually the borrower's first, schools
should explain clearly the basic terminology to ensure that
borrowers are fully aware of their obligations.
- Schools should mention that a borrower's EXACT repayment
schedule will not be provided until loan repayment begins.
Although the disclosure statement and the promissory note contain
the loan's total dollar amount, including the interest rate and fees,
these documents do not necessarily specify each payment amount
or the payment frequency. Schools should remind students that
certain fees will be subtracted from the loan amount BEFORE the
loan is disbursed but that repayment of the FULL loan amount is
required. Schools should emphasize that loan repayment is
required even if the program is not completed or does not meet the
borrower's expectations. This is a point at which schools could
explain their refund policy, so that students know that if they leave
school (for whatever reason), a portion of their loan disbursement
MAY be returned to the Department.
[[Keeping Direct Loan Servicing Center informed]]
- Schools also should explain to borrowers that they must inform
their Direct Loan Servicing Center if they
- fail to enroll in school for the period for which the loan was
- change schools,
- change their name or address (including changing their
permanent address while in school),
- graduate or withdraw from school,
- wish to apply for a deferment,
- wish to request forbearance, or
- are having difficulty repaying the loan.
- SCHOOLS MUST DESCRIBE IN FORCEFUL TERMS THE
LIKELY CONSEQUENCES OF DEFAULT, INCLUDING
ADVERSE CREDIT REPORTS, WAGE GARNISHMENT, AND
LITIGATION. For information on default's effect on borrowers,
see Section 4.
- SCHOOLS MUST PROVIDE INFORMATION ABOUT
AVERAGE INDEBTEDNESS. Schools are required to provide
each borrower with general information about the average
indebtedness of students who obtained Direct Subsidized or Direct
Unsubsidized Loans for attendance at the school or in a borrower's
program of study.
- SCHOOLS MUST INFORM THE STUDENT ABOUT THE
AVERAGE ANTICIPATED MONTHLY REPAYMENT BASED
ON THE AVERAGE INDEBTEDNESS.
Borrowers should be told the financial aid office is there to help if
they have questions about their Direct Loans. In addition, borrowers
should be informed they also can get help by calling their Direct
Loan Servicing Center.
Because many students leave school before the scheduled end of
their academic programs, aid administrators should emphasize during
entrance counseling that borrowers are obligated to attend exit
counseling before they cease to be enrolled at least half time.
Schools may adopt alternative approaches for entrance counseling as
part of the schools' quality assurance plans, described in section
685.300(b)(9) of the Direct Loan Program regulations. Schools
adopting an alternative approach need not meet all the entrance
counseling requirements described above, unless the Department
determines that a school's approach is inadequate. Schools using an
alternative approach must
- ensure that each first-time borrower is given written counseling
materials containing the required information on the previous
pages and in Direct Loan regulations;
- target those students most likely to default and provide them with
more intensive counseling and support services; and
- include performance measures with objective outcomes
demonstrating the alternative approach's effectiveness, such as
levels of borrowing, default rates, and withdrawal rates.
Schools must conduct IN-PERSON exit counseling for Direct
Subsidized or Direct Unsubsidized Loan borrowers shortly before
they cease at-least-half-time study, EXCEPT
- in the case of a correspondence program, schools must mail
borrowers written counseling materials within 30 days after the
borrowers complete the program; and
- if borrowers withdraw without a school's prior knowledge or fail
to attend exit counseling sessions as scheduled, schools must mail
written counseling materials to the borrowers' known addresses
within 30 days after learning the borrowers have withdrawn or
failed to attend the scheduled session.
When sending exit counseling materials, return receipts are not
required. However, schools should maintain documentation in
borrowers' files verifying compliance with the regulatory counseling
requirements. If borrowers fail to provide a name, address,
references, or an employer and employer address, schools are not
required to take further action.
Much of the same material presented at the entrance counseling
session will be presented during exit counseling. For example,
schools must inform borrowers about the seriousness and importance
of their repayment obligation and to describe in forceful terms the
likely consequences of default (see Section 4). The emphasis for exit
counseling shifts, however, to loan repayment obligations and debt
management strategies. At the exit counseling session, the following
points must also be covered:
- SCHOOLS MUST INFORM BORROWERS OF THE
AVERAGE ANTICIPATED MONTHLY REPAYMENT
AMOUNT BASED ON THEIR INDEBTEDNESS. This
information permits borrowers to begin short- and long-term
- SCHOOLS MUST REVIEW BORROWERS' AVAILABLE
REPAYMENT OPTIONS (THE STANDARD REPAYMENT,
EXTENDED REPAYMENT, GRADUATED REPAYMENT,
AND INCOME CONTINGENT REPAYMENT PLANS AND
LOAN CONSOLIDATION). Schools should explain that all
Direct Loans must be repaid under the same repayment plan,
except that borrowers with Direct PLUS Loans or Direct PLUS
Consolidation Loans may repay those loans separately. Section 2
describes available repayment options; Section 3 covers loan
- SCHOOLS MUST PROVIDE DEBT MANAGEMENT
STRATEGIES THAT WOULD FACILITATE REPAYMENT.
Schools should encourage borrowers to avoid excessive debt
whenever possible. Borrowers should try to spend no more than 5
to 15 percent of their net income for monthly payments on student
loans and consumer debts, including credit card and car payments.
Borrowers using more than 15 percent of their monthly net income
for these payments may need to make some budget adjustments.
- SCHOOLS MUST EXPLAIN TO BORROWERS HOW TO
CONTACT THE APPROPRIATE DIRECT LOAN SERVICING
CENTER. The Direct Loan Servicing Centers maintain toll-free
telephone numbers and special mailing addresses to answer
borrower inquiries. This information is in Chapter 1 and in the
Direct Loan Program entrance and exit loan counseling guides.
- SCHOOLS MUST REVIEW WITH BORROWERS
DEFERMENT AND DISCHARGE CONDITIONS. Schools
should inform borrowers that they can postpone loan payments by
applying, and receiving approval, for a deferment or a forbearance
through the appropriate Direct Loan Servicing Center. Section 2
describes deferments and forbearances.
- SCHOOLS MUST REQUIRE BORROWERS TO CORRECT
SCHOOL RECORDS CONCERNING NAME, ADDRESS,
SOCIAL SECURITY NUMBER, REFERENCES, DRIVER'S
LICENSE NUMBER AND THE STATE WHERE IT WAS
ISSUED, AND THE NAME AND ADDRESS OF THE
BORROWER'S EXPECTED EMPLOYER (IF KNOWN).
Within 60 days after exit counseling, schools must provide the
Direct Loan Servicing Center with any corrections to the name,
latest known address, employer and employer address, and address
of the borrower's next of kin. (THIS LATTER ITEM IS A
STATUTORY REQUIREMENT, ALTHOUGH IT IS NOT YET
IN THE REGULATIONS.)
As is true for all schools participating in SFA Programs, Direct Loan
schools must comply with verification requirements, explained in
The Verification Guide. These requirements apply to Direct
Subsidized Loan applicants but not to Direct Unsubsidized Loan or
Direct PLUS Loan applicants.
If a school becomes aware that a student has obtained additional
financial assistance resulting in the student's receiving an award in
excess of financial need, the school must return any excess Direct
Loan proceeds to the Department. See Chapter 2 for a discussion of
All schools must establish a fair and equitable refund policy for
returning unused tuition, fees, and room and board charges
connected with a student who receives SFA funds but who has
stopped attending school after attending at least one class. Schools
must send all refunds directly to the Loan Origination Center--funds
must not be given to students or parents. See Chapter 3 for a
discussion of refunds.
Schools participating in the Direct Loan Program create and transmit
loan origination records and promissory notes, request and disburse
funds, and report the maintenance and expenditure of those funds. A
school's records of these activities are matched monthly to the
records the Loan Origination Center maintains. Procedures for this
monthly data match, called reconciliation, are covered in the Direct
Loan School Guide and in the Reconciliation Guide for Direct
Student Status Confirmation Report Requirements
Schools are required to comply with Student Status Confirmation
Report (SSCR) requirements. Schools complete and return these
reports to the Department at least semiannually. The reports inform
the Department of the address and enrollment status of students who
borrowed Direct Subsidized and Direct Unsubsidized Loans and of
students for whom parents borrowed Direct PLUS Loans. Schools
must complete and return an SSCR to the Department within 30 days
of receiving it.
Schools need to be aware if the student
- has ceased to be enrolled on at least a half-time basis,
- was accepted for enrollment at the school but did not enroll on at
least a half-time basis for the period for which the loan was
- has changed his or her permanent address.
If a school does not expect to submit an SSCR within 60 days of
becoming aware that any of the above information has changed for
any student, the school must inform the Department within 30 days
of becoming aware of the change.
For complete information, see the NSLDS Student Status
Confirmation Report (SSCR) User's Guide.
Recordkeeping and Audits
Chapter 3 contains complete information on recordkeeping and audit
requirements. Highlights of those requirements are discussed here.
Schools must maintain records to document compliance with the
statute and regulations. These records include but are not limited to
- the amount of the loan and the loan period for which the loan
- financial assistance that was available to the student and used in
determining estimated financial assistance for the loan period,
- the data used to construct a student's budget or the school's
itemized standard budget used in calculating the student's
estimated cost of attendance,
- for Direct Subsidized Loans, the data used to determine the
- documentation of the student's eligibility to receive a Direct Loan,
- the amount and date of tuition and fees paid for the loan period,
- the amount of a refund paid to, or on behalf of, a student and the
date and basis of the refund calculation,
- the date and amount of each loan disbursement,
- the student's job placement, if known,
- borrower information collected at the exit interview, and
- documentation that the student received both entrance and exit
Loan program records pertaining to borrower eligibility must be kept
for three years after the end of the award year in which the student
borrower last attended the school.
Other program records that are not borrower specific and that pertain
to the school's participation in Direct Loans--including records such
as the Program Participation Agreement and drawdown records that
are not borrower specific--must be kept for three years after the end
of the award year in which the school submits the records to the
Each school may establish a fiscal and administrative recordkeeping
system maintained in a variety of formats, for example, hard copy,
microform, computer file, optical disk, or CD-ROM. In the event of
a school's closure, termination, suspension, or change of ownership,
the school or its successor must provide for the retention of records
and for ready access to them by designated federal officials for
auditing and examination purposes.
A school must cooperate in the conduct of audits, investigations,
program reviews, or other reviews authorized by law. Cooperation
includes providing timely access to records for Department and other
authorized officials. Each year, an independent certified public
accountant must audit the school; the audit must cover the period
since the previous audit.
Any records involved in a federal audit procedure must be retained
until the later of (1) the date the audit is completed or (2) the end of
the record retention period.
In addition to Chapter 3, the Department's Student Financial
Assistance Programs Audit Guide provides information.
*1* To establish a student's withdrawal date, schools must follow the
procedures in Chapter 3. Note that for a student who does not return
for the next scheduled term following a summer break, a school must
determine the student's withdrawal date no later than 30 days after
the next scheduled term starts.