Federal Student Aid - IFAP
AwardYear: 1997-1998
EnterChapterNo: 10
EnterChapterTitle: Federal Family Education Loan Program
SectionNumber: 11
SectionTitle: Additional School Requirements
PageNumbers: 111-118


Chapter 3 provides a general discussion of refunds and refund
policies. Only information specific to the Federal Family Education
Loan (FFEL) Program is provided here. Note that the refund policy
information in Chapter 3, of course, extends to a parent who receive
a Federal PLUS Loan on behalf of a dependent student who does not
enroll for the academic period for which the loan was intended or
who does not complete the academic period for which the loan was

[[Refund to student via lender]]
In the case where a school makes a refund to a student via the lender,
the school must make the refund within 60 days after the student's
official withdrawal date. If a student drops out, the school must pay
the refund within 60 days of the earliest date of the following three

1) the date the student dropped out according to the school

2) the last day of the academic term in which the student withdrew

3) the last day of the period of enrollment for which the student has
been charged

[[Student doesn't return from leave of absence]]
Concerning the refund policy for a student who does not return to
school following an approved leave of absence, any refund due must
be paid within 30 days of whichever of the following dates is earlier:

1) the expiration of the leave of absence

2) the student's date of notification that he or she will not be
returning to the institution after the leave of absence expires

If the student was on an unapproved leave of absence, the refund
must be made within 60 days of the student's last recorded date of
class attendance.


When a school makes a refund to a lender, the school must notify the
student in writing and--if the borrower is the student's parent--the
school must also notify the parent.


A school is required to inform a lender or guaranty agency within 30
days of discovery of any change in a Stafford Loan borrower's
permanent address. The school also must (on request) provide a
lender or guaranty agency with the borrower's name, address, and if
possible, the employer and employer address. Within 60 days after
the exit interview, the school must provide the guaranty agency that
was listed in the borrower's student aid records with updated
information about

- the borrower's future permanent address,

- the borrower's Social Security Number,

- the identity and address of the borrower's expected employer,

- the address of the borrower's next of kin, and

- the borrower's driver's license number.

To promote loan repayment, a school may make agreements to
provide the holders of delinquent loans of current or former students
with information about the delinquent borrower's location or
employment. The school may also try to contact the borrower and
counsel him or her to avoid default.

A lender must provide a school with the name and Social Security
Number of the student for whom a parent is borrowing a PLUS
Loan. If a lender has requested preclaims assistance from a guaranty
agency, the guaranty agency (rather than the lender) must provide
the school at which the borrower obtained a loan with the borrower's
name, address, and Social Security Number. The guaranty agency
may charge the school a reasonable fee for the service. The school
may only use the information to remind the borrower to repay his or
her loan(s).

At the request of a school, a guaranty agency must provide, without
charge, information about students enrolled at the school if such
students are in default on FFELs. The guaranty agency must also
provide the school, on request, with the notice of sale, transfer, or
assignment of the loan to another holder, as well as the address and
telephone number of the new loan holder. This requirement must be
met prior to the beginning of the loan repayment period but only
applies if a borrower is in the grace period or is in repayment.


Record retention and examination requirements have been
standardized for all SFA programs and are set forth in the November
27, 1996 Student Assistance General Provisions Final Rule. Chapter
3 provides detailed information on these subjects. Included here is
FFEL-specific information.

A school must keep records relating to a student or parent borrower's
eligibility and participation in the FEEL Program for three years after
the end of the award year in which the student last attended the
institution. A school must keep all other records relating to the
school's participation in the FFEL Program for three years after the
end of the award year in which the records are submitted.

The following lists some examples of the types of student loan
records that a school must maintain:

[[Loan application]]
- the name of the borrower and a copy of the loan application (if the
borrower is a parent, the name of the student on whose behalf the
PLUS Loan was made);

- the Student Aid Report (SAR) or Institutional Student Information
Record (ISIR) used to determine the borrower's eligibility for SFA

[[Loan details]]
- the amount of the loan, its payment period, its loan period, (if
appropriate), the calculations used to determine the loan amount,
and the date and amount of each loan disbursement;

- the name and address of the lender;

- financial assistance that was available to the student and used in
determining estimated financial assistance (EFA) for the loan

[[Data used for COA]]
- the data used to construct an individual student's budget or the
school's itemized standard budget used in calculating the student's
estimated cost of attendance (COA);

[[Student's school account information]]
- the amount of a student's tuition and fees for the loan period, the
date the student paid the tuition and fees, and the date the loan
check was received and delivered to the student;

[[Refund recalculation]]
- the amount and basis for calculation of any refund paid to or on
behalf of the student; and

[[Data used to calculation EFC]]
- for subsidized Stafford Loans, the data used to determine the
student's EFC.

For Stafford Loans, loan records must also contain the following

- the date the school received each loan disbursement and the
amount of the disbursement;

- the date the school endorsed the loan check;

- the date(s) of transmittal of loan proceeds to the student;

- a record of the student's job placement, if known; and

- documentation of the student's Federal Pell Grant eligibility or

[[Format of records]]
A school may keep these required records in hard copy or in
microform, computer files, optical disk, CD-ROM, or other media
formats. All record information must be retrievable in a coherent
hard copy format or in other media formats acceptable to the

[[School that is lender]]
If a school is a lender and the holder of a promissory note, the school
must also retain the original note. Every two years, an independent
certified public accountant must audit the school; the audit must
cover the period of time since the previous audit. A school must
agree to allow the Department or a guaranty agency to audit the
school's records periodically to verify compliance with SFA

Student Status Confirmation Reports (SSCRs) are a reflection of a
school's FFEL borrower data. If these reports are not reconciled and
reflect inaccurate data, borrowers will not be converted to their grace
and repayment periods properly, and the school's cohort default rate
will likely be inaccurate. The school is responsible for completing

[[SSCRs and NSLDS]]
The Department has incorporated SSCRs into the National Student
Loan Data System (NSLDS) in order to centralize and fully automate
the enrollment verification process. In April 1996, all schools should
have received an electronic SSCR file from NSLDS via the Title IV
Wide Area Network (TIV WAN). This file contains enrollment
information on FFEL Program and Federal Direct Loan Program
borrowers that the Department believes are currently attending each
school or who have recently left each school.

Since NSLDS is taking over the SSCR process, guaranty agencies
will no longer send SSCRs to schools as of March 1, 1997 for
schools that have successfully completed their practice rosters; the
agencies now receive enrollment verification directly from NSLDS.
For further information on NSLDS, please consult "Dear Colleague"
Letter GEN-96-13 (July 1996).


[[Default rate above 20%]]
A school with a default rate above 20% is required to undergo a
biennial on-site guaranty agency review of its FFEL Programs,
unless the school is operating under an approved default
management plan or unless the school's default rate is based on loans
entering repayment totalling less than $100,000 in a given year.

More information is provided in the Audit Guide: Audits of Student
Financial Assistance Programs. Compliance audits must be
conducted by an independent auditor in accordance with the U.S.
General Accounting Office's (GAO's) Government Accounting
Standards. The Audit Guide sets forth general accounting standards
and the standards specifically for compliance audits.

These are some of the FFEL-specific requirements that are subject to

- A school must determine student eligibility. In the case of a PLUS
Loan, the financial aid administrator must also determine whether
the parent is eligible to borrow on behalf of an eligible dependent
student. Auditing of the determination of Pell Grant eligibility for
undergraduate Stafford Loan borrowers is also required.

- A school must complete portions of the loan application regarding
student eligibility, the student's estimated COA, the student's EFA,
and, if applicable, the EFC. The school also must meet the loan
certification and other requirements of 34 CFR 682.603.

- A school must follow prescribed procedures in the FFEL Program
regulations (34 CFR 682.604) for handling loan proceeds. These
procedures vary depending on whether the student does or does
not enroll and on whether the proceeds are payable to the student
only or jointly to the student and to the school.

- When a school becomes aware that: (1) a student with a deferment
no longer meets the conditions for an in-school deferment, (2) a
student who received a loan or for whom a PLUS Loan was
received failed to enroll at least half time for the period for which
the loan was intended or was otherwise ineligible for the loan, or
(3) a student's permanent address has changed, such information
must immediately be reported to the lender or the guaranty

- A school must establish adequate entrance and exit counseling


Chapter 3 provides detailed information on the Program Participation
Agreement (PPA). Provided here is FFEL-specific information about
the PPA. A school's PPA requires that

- a school beginning participation in the FFEL Program after a
change of ownership or a change in the school's status must
develop a Default Management Plan for approval by the
Department and must maintain the plan for two years after

- if a student is unable to pay costs of attendance owed a school
because of a delay in delivery of FFEL proceeds and the delay is
the fault of the school or is a result of adhering to SFA Program
requirements, the school may not penalize the student;

- a school provide students with recent data on employment and
graduation statistics when advertising job-placement rates to
recruit students;

- a school inform enrolled eligible borrowers of the availability of
state grant assistance from the state in which the school is located,
and provide a source of information for programs in the home
state of the eligible borrower; and

- a school certify the availability of a drug abuse prevention
program for officers, employees, and students of the school.

The PPA (as well as program regulations) also prohibits schools
from charging students fees for processing applications or data
required to determine eligibility for SFA Programs or for processing
FFEL Program deferment forms and prohibits the certification of
loans in excess of the student's eligibility.


An eligible school may not employ or use commissioned
salespersons to promote the availability of loans. A commissioned
salesperson is any person who receives compensation that is related
to, or calculated on the basis of, student applications, enrollments, or
acceptances. "Promote the availability" means providing prospective
or enrolled students with applications, names of lenders, or other
information designed to encourage students to apply for FFELs. This
term does not prohibit a commissioned salesperson from providing
prospective or enrolled students with general financial aid
information. However, the Higher Education Act of 1965 (HEA), as
amended, prohibits any commission, bonus, or other incentive
payments based on an employee's success in securing enrollment,
admissions, or the awarding of student aid. (This prohibition does
not apply to the recruitment of foreign students who are not eligible
for SFA funds.)

Similarly, guaranty agencies and lenders are prohibited by law from
offering inducements (such as points, premiums, or payments) to
schools or individuals as a means to market loans. Lenders and
guaranty agencies are also forbidden to mail unsolicited loan
application forms to a student, unless the student has previously
obtained a student loan from that lender or agency.

A school may not make payments to induce lenders to make loans to
students (or to the parents of students) at that school. Examples of
prohibited inducements are provided in 34 CFR 682.212(b) and

A March 1995 "Dear Colleague" Letter (95-G-278) provided further
guidance on prohibited inducements by lenders as a result of special
arrangements with schools and on limitations on lending by schools.