Federal Student Aid - IFAP
AwardYear: 1995-1996
EnterChapterNo: 2
EnterChapterTitle: Student Eligibility and Financial Need
SectionNumber: 2
SectionTitle: Overview of Financial Need
PageNumbers: 39-56

With the exception of the unsubsidized loan programs (unsubsidized
Federal Stafford, Direct Unsubsidized, Federal PLUS, Direct PLUS), a
student must demonstrate financial need to receive aid from the SFA
programs. Unlike scholarship programs that may award funds based
on academic merit or on the student's area of study, need-based aid is
awarded to students based on the family's need for assistance. The
concept of need is not a requirement solely for federal aid; it has also
been used for many years by schools and some states to award their
own aid.

Financial need is simply defined as the difference between the
student's cost of education and the family's ability to pay those costs.
Note that the student's financial need will be reduced by aid that is
awarded to the student.

The educational costs for the SFA programs are defined by statute
and are fairly easy to calculate based on the student's tuition and fee
charges, living situation (e.g., on-campus, off-campus with parents,
off-campus not with parents), as well as other factors that affect the
student. However, the student's ability to contribute toward these
costs, as measured by the "Expected Family Contribution," is a much
more complicated assessment.

The purpose of this section is to review the concept of financial need.
We will discuss family contribution analysis and the independent
student definition first and then proceed to calculating the cost of
attendance and a discussion of overawards and packaging.

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The Expected Family Contribution (EFC) is the amount that a family
can reasonably be expected to contribute toward college costs. It is
based on an analysis of the family's financial strength, including the
income and assets of the student and the student's spouse or, if the
student is dependent, the student and his or her parents. The EFC
formula also takes into account the family's expenses, looking at such
factors as the number of persons in the household, the number of
those persons attending college, and the special costs of two-worker

[[HEA '92]]
As mandated by the Higher Education Amendments of 1992, the EFC
is produced by a need-analysis formula known as the Federal Needs
Analysis Methodology. For more information on how the EFC is
calculated, see The Expected Family Contribution (EFC) Formulas,
1995-96. You can order a copy by calling the Federal Student Aid
Information Center at 1-800-4-FED-AID.

If the EFC is less than the cost of attendance (in other words, the
student's family cannot be expected to contribute the full costs faced),
the student is considered to have financial need. In the case of the
Federal Pell Grant Program, however, a maximum eligible EFC is
determined each year. Although a student whose EFC exceeds the
maximum may have financial need, he or she is not eligible for a
Federal Pell Grant. For 1995-96, the maximum EFC to qualify a
student for Pell eligibility is 2140. As long as the EFC is less than the
cost of attendance, the student will still be eligible for aid from other
SFA programs, provided that he or she meets the other eligibility
requirements of those programs.

[[Simplified needs test]]
Some students receive more than one EFC calculation. The Central
Processing System (CPS) will calculate a simplified EFC for students
who meet certain income and tax-filing requirements. For an applicant
who meets the requirements to have a simplified needs test, the
family's assets are not considered in the calculation; therefore, the
student does not need to provide this information on the application.
However, if the student does provide this information anyway, the CPS
will calculate two EFCs, one using the simplified formula and
resulting in a Primary EFC, and one using the full formula and
resulting in a Secondary EFC. In all cases, the formula produces an
equivalent or higher figure for the Secondary EFC. The financial aid
administrator may use either figure in determining eligibility for aid
from any of the SFA programs.

A student must meet both of the following qualifications to be eligible
for the simplified formula:

1. Of those family members whose financial information is
necessary on the application, none is required by IRS rules to
file an IRS Form 1040 for 1994. For an independent student, if
either the student or the student's spouse is required to file a
Form 1040, the student does not qualify for the simplified
formula. For a dependent student, if either the student or the
student's parents is required to file a Form 1040, the student
does not qualify for the simplified formula.

If the student (and spouse, if applicable) filed a 1040 but was
eligible to file a 1040A or 1040EZ, the student should indicate
1040A or 1040EZ for Question 53 of the financial aid
application. Likewise, if the parents of a dependent student filed
a 1040 but were eligible to file a 1040A or 1040EZ, they should
indicate 1040A or 1040EZ for Question 64 of the financial aid

2. The family's 1994 Adjusted Gross Income (earned income in the
case of non-filers) did not exceed $49,999. This income limit to
qualify for the simplified formula applies to the income of an
independent student and spouse or to the income of a dependent
student's parents. The income of a dependent student is not
counted toward this limit.

[[EFC for 9-month enrollment]]
The EFC found in the upper right hand corner of the Student Aid
Report (SAR) is based on a 9-month enrollment period and should
always be used when awarding a Federal Pell Grant, even if the
student is attending for a longer or shorter period. At the end of the
last page of comments on Part 1 of the SAR is the FAA Information
area. The second section of the FAA Information area contains the
headings "Months," "Primary EFC," and "Secondary EFC."

If only a Primary EFC appears, either the student has not met the
simplified-formula criteria (based on income or tax-filing status) or the
student has met this criteria and did not supply sufficient asset
information to permit a Secondary EFC calculation.

[[EFC for other than 9-month enrollment]]
In the second section of the FAA Information area, there is also a grid
of 1- to 12-month alternate EFCs. These figures represent alternate
EFCs that the financial aid administrator may use to award aid-other
than Federal Pell Grants for which the 9-month figure is always
used-if the student is attending for less than or greater than the
standard 9-month period. For dependent students, the alternate EFCs
for periods of attendance of other than 9 months are calculated by the
CPS according to a formula prescribed in the HEA. For independent
students, the law does not specify the adjustments, so the CPS
performs a simple proration of the EFC by month for the convenience
of the financial aid administrator.

[[Special circumstances]]
If the student has special circumstances not taken into account by the
EFC formula, the financial aid administrator may use professional
judgment, on a case-by-case basis, to adjust the value of specific data
items reported on the student's SAR. Special circumstances are
conditions that differentiate an individual student, not conditions that
exist for a whole class of students. Adjustments can either increase or
decrease a student's EFC or cost of attendance. For example, if a
dependent student's parent had retired since 1994 and, thus, the
family expected to have a lower income for 1995, the financial aid
administrator might use professional judgment to adjust the parents'
income. The reason for an adjustment must relate to that student's
special circumstance and must be documented in the student's file. For
more information on the use of professional judgment, see The
Counselor's Handbook for Postsecondary Schools, 1994-95.

One of the most significant decisions in need analysis is whether the
student should be treated as a dependent or an independent student
(in other words, whose ability to contribute should be analyzed). If the
student is considered to be dependent on his or her parents,
information on the income (and assets, if applicable) of the parents
must be collected on the financial aid application, and a parental
contribution will be added to the student's contribution.

[[Independent student definition]]
Traditionally, need-analysis methodologies have assumed that parents
have the primary responsibility to pay for their children's education.
However, there have always been exceptions to this rule for students
who no longer have contact with their parents, for nontraditional
students who are too old to be considered their parents'
responsibilities, and for students whose parents are deceased, as well
as for other cases. These exceptions have been subject to
congressional modifications over the years, and a significant change
occurred as a result of the Higher Education Amendments of 1992.
These amendments eliminated the provision that allowed students who
were not claimed as income-tax exemptions for the two years prior to
their first receiving SFA funds to file as independent if they could
document resources of more than $4,000 per year for the same two

[[HEA '92]]
For the 1995-96 award year, a student is automatically independent if
he or she meets at least one of the following criteria:

1. The student is at least 24 years of age by December 31, 1995.
For the 1995-96 year this means that the applicant must have
been born before January 1, 1972.

2. The student is a veteran of the U.S. Armed Forces.

3. The student is a graduate or professional student.

4. The student is married (which may depend upon the common
law rules in the student's state of legal residence).

5. Either the student is a ward of the court (or was a ward of the
court until age 18), or both parents are deceased and the student
has no adoptive or legal guardian. Note that a student is not
considered a ward of the court based solely on being

6. The student has legal dependents other than a spouse.

As you will note from a review of the preceding criteria, a student's
living situation (i.e., whether the student lives with his or her parents)
does not affect the student's dependency status. Complete definitions
of these criteria can be found in the Free Application for Federal
Student Aid.

[[Professional judgment]]
In unusual circumstances, a student who does not meet any of these
criteria may still be considered to be independent on the basis of the
financial aid administrator's professional judgment. The aid
administrator must make this decision on an individual (case-by-case)
basis and must document the reason(s) for that decision in the
student's file. Because there is no Correction Application for 1995-96,
it is now possible to use the SAR to change the student's dependency
status. A dependency override can be performed by using the
SCHOOL USE ONLY box of Part 2 on the SAR. The Counselor's
Handbook and A Guide to 1995-96 SARs and ISIRs (GEN-95-10)
provide information on the proper procedures.

Please bear in mind that the aid administrator may use professional
judgment only to classify as independent a student who would
otherwise be considered dependent. An aid administrator cannot
require a student who meets one of the criteria for independence to
file as a dependent. However, the financial aid administrator may
adjust an independent student's assets or income to include a parental
contribution if the aid administrator decides that such a contribution is
warranted. Again, any such individual determination must be
documented in the student's files.


The cost of attendance is an estimate of a student's educational
expenses for the period of enrollment. A student's financial need for
assistance from the SFA programs is equal to his or her cost of
attendance, minus the student's EFC, minus financial aid from other
sources. Another way to express this formula is to say that the total
aid the student may receive from the SFA programs and other sources
when added to the student's EFC may not exceed the student's cost of
attendance. (However, note that the Federal PLUS loan, the Direct
PLUS loan, the unsubsidized Federal Stafford Loan, and the Direct
Unsubsidized Stafford Loan can be substituted for the EFC, as
described later.)

The components of the cost of attendance are the same for all SFA
programs. However, in the case of programs of study or enrollment
periods that are less than or greater than the school's academic year,
the cost of attendance for purposes of loans and campus-based aid will
be different from the cost of attendance for the Federal Pell Grant
Program. The Pell costs are always prorated to the costs for a full-time
student for a full academic year, but the cost of attendance for the
other programs is based on the student's actual costs for the period for
which need is being analyzed. See Chapter Four for further

[[Tuition and fees]]
Except as provided below, a student's cost of attendance is the sum of
the following:

[[Books, supplies, etc.]]
1. the tuition and fees normally assessed a student carrying the
same academic workload, including costs of rental or purchase of
equipment, materials, or supplies required of all students in the
same course of study;

2. an allowance for books, supplies, transportation, and
miscellaneous personal expenses;

[[Room and board]]
3. an allowance for room and board;

[[The chart on page 2-44 is currently unavailable for viewing.
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4. for a student with dependents, an allowance for costs expected to
be incurred for dependent care (during periods that include, but
are not limited to, class time, study time, field work, internships,
and commuting time for the student), the amount of which
should be based on the number and age of such dependents and
should not exceed reasonable cost in the community for the kind
of care provided;

[[Study abroad]]
5. for study abroad programs approved for credit by the student's
home institution, reasonable costs associated with such study;

[[Costs related to disabilities]]
6. for a disabled student, an allowance for expenses related to the
student's disability including special services, personal
assistance, transportation, equipment, and supplies that are
reasonably incurred and not provided for by other agencies;*10*

[[Cooperative education]]
7. for students placed in a work experience under a cooperative
education program, an allowance for reasonable costs associated
with such employment; and,

[[Origination fees and insurance premiums]]
8. for students receiving SFA loans, the fees required to receive
them (for example, the loan fee for a Direct Loan or the
origination fee and insurance premium for a FFEL loan). Schools
may also include the fees required for nonfederal student loans
(that is, nonfederal loans that must be considered resources for
the student when packaging). In all cases, the school can either
use the exact loan fees charged to the student or an average of
fees charged to borrowers of the same type of loan at that

Exceptions to the normal cost of attendance allowances

The exceptions to the normal cost of attendance allowances discussed
above are:

[[Less-than-half-time students]]
1. For students who are enrolled less than half time, only the costs
for tuition and fees and allowances for books and supplies,
transportation (but not miscellaneous expenses), and dependent
care expenses may be included.

[[Correspondence study students]]
2. Generally, the cost of attendance for a correspondence study
student is restricted to the costs for tuition and fees. However, if
the student is fulfilling a required period of residential training,
the cost of attendance can also include required books and
supplies, an allowance for travel, and room-and-board costs
specifically incurred. (Note: a student is not eligible to receive
aid from the SFA programs for correspondence courses unless
they are a part of an associate-, bachelor-, or graduate-degree
program and the school meets the criteria for the percentage of
courses taught using this medium. See Chapter Three for further

[[Incarcerated students]]
3. The cost of attendance for incarcerated students is limited to
cost of the tuition and fees and required books and supplies.
Bear in mind that an incarcerated student is ineligible to receive
an SFA loan and that if the student is incarcerated in a federal or
state penal institution, he or she may not receive a Pell Grant.
See Incarcerated Students in Section One of this Chapter.

[[Students receiving instruction by telecommunications]]
4. In determining a student's cost of attendance, no distinction is
made regarding the mode of instruction, except that the cost to
rent or purchase equipment is excluded for students receiving
instruction by telecommunications. However, if the aid
administrator, using professional judgment, determines that
instruction by telecommunication substantially reduces elements
of a student's cost of attendance, the aid administrator must
reduce the student's eligibility for grants, loans, or work-study
assistance by adjusting the cost of attendance accordingly.

[[Special circumstances]]
5. The financial aid administrator has the authority to use
professional judgment to adjust the cost of attendance for the
SFA programs on a case-by-case basis to allow for special
circumstances. Such adjustments must be documented in the
student's file.


We have seen how to find a student's financial need by subtracting the
EFC from the cost of attendance, but the student may be receiving aid
from other sources to help meet that financial need. A basic premise of
need-based aid is that the total package of aid must not exceed the
student's financial need. Aid in excess of need is referred to as an
overaward. Because of differences in the way aid is handled in each of
the SFA programs, there are differences in the way that each program
takes into account other sources of aid.

Determining Remaining Need

[[Pell Grants]]
Federal Pell Grants are considered to be one of the first sources of aid
to the student. The Department issues Pell Grant payment and
disbursement schedules that base the award solely on the student's
cost of attendance, EFC, and enrollment status. When awarding other
sources of need-based aid, the financial aid administrator must take
eligibility for the Pell Grant into account. However, it is always
possible that the student will receive a scholarship or other aid that, in
combination with the Pell Grant, causes the student's financial aid
package to exceed his or her need. The school may not award other
need-based FEDERAL aid that would cause the package to exceed
the need; however, if the student's need is exceeded due to the
combination of the Pell Grant and other sources of aid, the student is
still eligible for the Pell Grant as determined by the payment or
disbursement schedule.*11*

[[The graphic "Pell Example" on page 2-47 is currently unavailable for
viewing. Please reference your paper document for additional

[[Campus-based resources]]
Any available campus-based aid is usually packaged before FFEL and
Direct Loans because aid from these programs is more attractive to
the student. In contrast to the Pell Grant Program, the regulations for
the campus-based programs specifically require the school to take into
account all resources available to the student when awarding funds
from these programs. Such resources include the student's Pell Grant
eligibility (regardless of whether the student applies for a Pell Grant),
subsidized Stafford Loans, Direct Subsidized Loans, veterans benefits,
outside scholarships, and net earnings from NEED-BASED
employment that will be received during the award year. If the total of
the student's EFC, resources, and campus-based aid exceeds the
student's cost of attendance, the campus-based aid must be reduced to
prevent an overaward. Note that there are overaward "thresholds"
for the campus-based programs, as we will discuss later in this section.
(See also Chapter Five, Section Two.)

[[The graphic "Campus-Based" on page 2-48 is currently unavailable for viewing.
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[[FFEL and Direct Loans estimated financial assistance]]
The statute governing the Federal Family Education Loans (subsidized
and unsubsidized Stafford, and PLUS) and Direct Loans (Direct
Subsidized, Direct Unsubsidized and Direct PLUS) does not use
exactly the same definition of "resources" as do the campus-based
programs. Instead a similar measure, called "estimated financial
assistance," is used for determining FFEL and Direct Loan eligibility.
Prior to 1995-96, estimated financial assistance included the estimated
amount that a student could receive from the Pell Grant,
campus-based, and other federal and nonfederal scholarship, grant,
loan, and need-based work programs, regardless of whether the
student actually applied for aid from those programs.. For 1995-96,
estimated financial assistance, like resources for the other SFA
programs, includes the student's Pell Grant eligibility and other aid
the student will receive. The school may certify a subsidized Stafford
Loan and Direct Subsidized application only for the amount of need
that remains after subtracting both the student's EFC and estimated
financial assistance from his or her cost of attendance. However, the
unsubsidized Stafford, PLUS, Direct Unsubsidized, Direct PLUS, state
and private education loans are not considered to be a resource
because they can be used to finance (or replace) the EFC. Thus,
students may borrow under these programs up to the amount of the
EFC without affecting eligibility for campus-based aid or a subsidized
Stafford Loan or Direct Subsidized Loan. For instance, in the
campus-based example just shown, the student could receive a $1,500
private education loan, unsubsidized Stafford Loan, or Direct
Unsubsidized Loan without being overawarded. None of these loans
would be considered a resource as long as it did not exceed the EFC.

Note that a student may qualify for a combination of a subsidized and
an unsubsidized loan. A student loan is "unsubsidized" when the
student is responsible for the interest that accumulates while the
student is enrolled in school and during the grace period. These
interest payments may be deferred until the student enters repayment.

For a dependent student whose parents are able to borrow a PLUS or
Direct PLUS, the maximum amount the student may borrow under the
unsubsidized Stafford Loan or Direct Unsubsidized Loan programs is
the amount that can be borrowed under the Stafford Loan or Direct
Loan Program for that grade level and program length, less the
amount that has been borrowed under the subsidized program (if any).
For example, if a dependent student whose loan limit is $2,625
qualifies for a $1,600 subsidized Stafford Loan or Direct Subsidized
Loan, he or she may borrow an additional $1,025 ($2,625-$1,600)
unsubsidized Stafford Loan or Direct Unsubsidized Loan, as long as
the total of all aid received does not exceed the student's cost of

The independent student (or the dependent student whose parents are
unable to obtain a PLUS or Direct PLUS loan) is permitted the same
amount as the dependent student based on grade level and length of
program, under a combination of the subsidized and unsubsidized
program (the mix of which depends upon the student's need).
However, this student can borrow an additional UNSUBSIDIZED loan
amount. The maximum additional amount is limited to either the total
of the student's EFC and remaining need or the applicable
unsubsidized loan limit found in the chart on page 2-34 minus the
subsidized amount already borrowed, whichever is less. When
packaging aid, it may help to think of this additional unsubsidized loan
as functioning similarly to loans that were borrowed under the
Supplemental Loans for Students Program, which has been

Remember that before the school may certify a Stafford Loan or
Direct Loan, it must have determined the student's eligibility for a
Federal Pell Grant. The results from the federal processor do not
have to be on file at the time the loan is certified. Instead, a
determination of the student's Pell eligibility could be made through
software available at the school. On the other hand, the school MUST
have evidence that the student's data went through the CPS before the
loan is disbursed.

[[The graphic on pages 2-50 and 2-51 and the chart describing
"Resource" and "Estimated Financial Assistance" on
page 2-52 are currently unavailable for viewing. Please reference
your paper document for additional information.]]

Packaging Aid

Packaging is the process of finding the best combination of aid to meet
the student's financial need, given the constraints of available funds. If
your school does not participate in the campus-based programs and
does not have its own sources of aid, the student is eligible for a
specified Federal Pell Grant amount, and any subsidized loan under
the Federal Family Education Loan Program or the Direct Loan
Program is limited to either the amount of the student's remaining
financial need after his or her estimated financial assistance is taken
into account or the loan limit for the student's level and enrollment
status, whichever is less. (Of course, as explained earlier, the student
may also borrow an unsubsidized Stafford, Direct Unsubsidized Loan,
PLUS, Direct PLUS, state-sponsored or private education loan equal
to the amount of the EFC.)

[[Packaging philosophies]]
On the other hand, if your school does have other sources of aid, you
must decide how to allocate scarce funds from different sources to
meet students' needs. Should you give priority to students who apply
for aid first (on a "first-come-first-served" basis)? Should grant
assistance be awarded to beginning students and loans and work-study
to students who have had a chance to adapt to the academic program?
If you do not have enough funds to meet every student's need, should
your policy be to give more assistance to the neediest students or to
meet an equal proportion of each student's need across the board?

[[Vocational Rehabilitation]]
Special considerations in packaging also arise when students qualify
for both SFA funds and vocational rehabilitation assistance funds. In
that case, the school should determine the student's package exclusive
of both the costs related to the student's disability and the anticipated
vocational rehabilitation assistance. This approach will result in the
student's being offered the same aid package as a student who is in
the same financial situation but does not have disabilities, and it will
result in the student's receiving the maximum amount of vocational
rehabilitation aid to which the student is entitled. Otherwise, if the
school's packaging procedures consider both the disability-related
costs and an anticipated vocational rehabilitation aid amount that
happens to be less than those costs, the amount of SFA funds in the
student's package may increase to cover the remaining costs;
however, when the vocational rehabilitation agency actually disburses
funds, rather than disbursing enough to cover all of the
disability-related costs, the agency will take that SFA increase into
consideration and disburse only the anticipated amount. Although the
school has covered all of the student's need in both cases, if the
increase in SFA funds in the second case is the result of an increased
loan amount, the school has unnecessarily added to the student's debt
burden. Although the vocational rehabilitation funds should not be
considered a resource when the school packages, the school must
coordinate funds available from the vocational rehabilitation agency
and from institutional, state, and federal student financial assistance
programs to prevent an overaward. The amount of assistance from the
vocational rehabilitation agency must be documented in the student's

Each state association of student financial aid administrators has a
voluntary agreement with its state vocational rehabilitation agency
specifying the procedures for coordinating vocational rehabilitation
assistance with other forms of financial aid. For information about
your state association's agreement, contact that association or a
regional office of the U.S. Department of Education.

Each school may have a different philosophy of packaging, depending
upon the characteristics of its academic programs and the makeup of
its student body. Section Nine of the Self-Instructional Modules
(formerly produced through contract by the Student Financial
Assistance Programs) discusses some of the basic types and
philosophies of packaging. Although the modules have not been
updated, you may still find the general discussion of packaging useful.
To get ideas about different approaches to packaging, you may also
want to refer to materials prepared by the professional associations
representing schools and financial aid administrators or to consult
with other aid administrators at schools that have similar


While the school must always take care not to overaward the student
when packaging aid, circumstances may change after the aid has been
awarded. For instance, the student may receive an academic
scholarship, or the student may want to extend his or her work-study
employment. When these circumstances would lead to an overaward,
the school may be required to adjust the federal student aid in the
package. When doing so, the following principles should be kept in

[[Pell Grants]]
- Pell Grants are never adjusted to take into account other forms of
aid, except possibly in the case of recipients of Paul Douglas
Scholarship Program and the National Science Scholars Program
as noted earlier in this chapter and as discussed at length in
Chapter Nine.

[[Adjusting Stafford and Direct Loans]]
- If all or a portion of a student's unsubsidized Stafford Loan,
Direct Unsubsidized Loan, or nonfederal loan or the parents'
Direct PLUS or PLUS loan is being used to cover need that was
previously unmet, the loan can be adjusted to replace the EFC
and, thus, reduce or eliminate the overaward.

- The second or subsequent disbursement of a subsidized or
unsubsidized loan can be canceled or reduced to reduce or
eliminate the overaward.

- If these adjustments have been made and an overaward still
exists for a Stafford Loan borrower or Direct Loan borrower, the
law requires the financial aid administrator to withhold and
promptly return to the lender or the federal government any
subsidized or unsubsidized funds that have not yet been delivered
to the borrower. Note that Stafford and Direct Loan overawards
must be repaid before adjusting or canceling campus-based funds.
Instead of returning the entire undelivered aid, a financial aid
administrator may choose to return only the amount of aid for
which the student becomes ineligible. For example, if the loan
disbursement were for $1,000 and the amount of the overaward
were $800, the aid administrator could return just the $800 or
could instead return the entire check and have the lender issue a
new check for $200. In either case, the financial aid administrator
must provide the lender with a written statement describing why
the funds were returned.

- For a Direct Loan borrower, the financial aid administrator may
choose either to return the amount of loan for which the student
becomes ineligible or to cancel the loan, return the full
disbursement, and originate a new loan for the lower amount. If
we take our Stafford example with a $1,000 disbursement and an
overaward of $800 and apply it to a Direct Loan school, we
see that the aid administrator could either return just the $800 or
return the full disbursement, canceling the loan, and originate a
new loan for $200. If the aid administrator chooses the latter, a
new origination record must be created, and a new promissory
note must be generated for the student to sign.

- Funds returned to the lender or the government must be applied
to reduce the student's loan balance. Because a Stafford Loan
lender deducts the origination fee and insurance premium before
disbursing a loan check to a school, the lender must reduce or
cancel these fees accordingly when the school returns funds. If
only the amount of the overaward is returned, the lender must
reduce the insurance premium and origination fee to reflect the
lower loan amount. If the full disbursement is returned, the lender
must cancel the insurance premium and origination fee. For a
Direct Loan, the federal government will adjust the loan fee
accordingly. See Chapter Ten, Section Six for more information
on returning overawards.

- The requirement to refund overawards to the lender or the
government does not apply to Stafford Loans made to cover the
cost of attendance at foreign schools or to PLUS or Direct PLUS

- Although a school is not required to return Stafford Loan or
Direct Loan funds that were delivered to the borrower (either
directly or by applying them to the student account) before the
overaward situation occurred, the law does not prevent the school
from returning funds that were applied to the student account if
the school chooses to do so.

[[Campus-based awards]]
- A Stafford Loan or Direct Loan borrower who is overawarded and
receives funds disbursed directly to him or her is not required to
repay funds that were delivered in excess of need unless the
overaward was caused by his or her misreporting or withholding
of information.

- If reducing undisbursed Stafford Loans or Direct Loans is not
sufficient to eliminate the overaward, the school may be required
to reduce the amount of campus-based aid that has been awarded
the student. Campus-based aid need not be reduced if the
overaward does not exceed $300, which is now the overaward
threshold for all campus-based programs. Prior to the 1995-96
award year, the threshold was $200 for Perkins Loans and
FSEOG and for FWS unless FWS was the only campus-based aid
in the student's package. If this were the case, the FWS
overaward threshold was $300.

NOTE: The $300 threshold is allowed only if an overaward
occurs after campus-based aid has been packaged. The threshold
does not allow a school to deliberately award campus-based aid
that, in combination with other resources, exceeds the student's
financial need. See Chapter Seven, Section Two, for a more
detailed discussion of these overaward provisions.

If the overaward cannot be eliminated by reducing future
payments of campus-based aid, the student must repay the full
amount of the campus-based funds that he or she received in
excess of need. Note, however, that the student cannot be
required to repay FWS wages he or she has earned.

*9* The Technical Amendments added the provision that a student
qualified under this category even though he or she lost the Ward of
the Court status as age 18. For 1995-96, application forms have been
changed to reflect the broadening of this category.

*10* A student is disabled if he or she is deaf, mentally retarded, hard
of hearing, speech or language impaired, visually disabled, seriously
emotionally disturbed, orthopedically impaired, or autistic, or has a
traumatic brain injury, is otherwise health-impaired, or has specific
learning disabilities that required special education and related
services. There is not maximum to the allowance for expenses related
to a disability. However, the school should be careful not to include
costs for services or equipment provided free of charge by other
assisting agencies.

*11* The exception to this is that an adjustment may be needed for
recipients of Paul Douglas Teacher Scholarship Program and the
National Science Scholars Program. See Chapter Nine for further