The following special topic paper originally appeared in the publication Pursuing Regulatory Compliance for Digital Instruction in Response to Covid-19: Policy Playbook, which was published by the Every Learner Everywhere Network and develop and edited by WCET. The Playbook gives background on several regulations, resources to understand them, and recommendations on how to comply.
Today, we are featuring the special topic on Financial Aid by Jill Desjean, Policy Analyst, National Association of Student Financial Aid Administrators (NASFAA). Thank you to Jill for providing this excellent primer on financial aid audits and reviews, aid for distance education, and key considerations for financial aid in the case of remote and/or distance education.
Next time we will have our final post highlighting the Policy Playbook and is focused on Accessibility.
Enjoy the read,
– Lindsey Downs, WCET
Federal Financial Aid programs are intended to assist students with the financial aspects of accomplishing their postsecondary education goals. These aid programs are authorized by Title IV of the Higher Education Act of 1965 (HEA), as amended. They include the:
- Federal Pell grant program,
- Direct Loans, and
- campus-based grant and work study programs, among others.
In total, the federal student aid programs provide more than $120 billion in financial assistance for postsecondary education. Institutions of higher education must meet certain eligibility requirements to qualify for participation in the federal student aid programs, including being accredited by a U.S. Department of Education – recognized accrediting agency, being approved by the Department, and being authorized to operate in the state. To maintain continued eligibility, institutions must demonstrate that they are financially responsible, administratively capable, and adhere to a number of consumer disclosure requirements.
Students must also meet certain eligibility requirements to receive federal student aid at a Title IV-eligible institution. These include but are not limited to:
- being a U.S. citizen or eligible noncitizen,
- making satisfactory academic progress toward a degree or credential,
- being registered for Selective Service,
- not being in default on a federal student loan, and
- having no prior drug offense convictions.
Applying for Financial Aid
Students begin the financial aid process by completing the Free Application for Federal Student Aid (FAFSA). The FAFSA is valid for one academic year and students must submit a new application annually to qualify for financial aid.
Roughly 30% of applications are selected for a process called verification, by which students submit supporting documentation to confirm the information they provided on the FAFSA is correct. Financial aid administrators review and, if necessary, correct and update the FAFSA using the documentation the student provides.
The application and verification process results in the calculation of the Expected Family Contribution (EFC) using a formula developed by Congress. Institutions calculate a student’s estimated costs for a period of enrollment, typically an academic year, called the Cost of Attendance (COA). The COA is comprised of both direct institutional charges like tuition, fees, and on-campus housing and meal plans, as well as indirect education-related expenses such as books and supplies, off-campus housing, food, transportation, childcare, and personal expenses.
The COA represents the total amount of financial aid a student can receive from any source (federal, state, institutional, or private) for that period of enrollment. The COA less the EFC represents the total amount of need-based financial aid (Pell grants, subsidized Direct Loans, some state, institutional, or private scholarships) a student can receive from any source. So, for instance, a student with a COA of $30,000 and an EFC of $5,000 could receive need-based aid of up to $25,000 plus non-need-based aid of up to $5,000.
Financial Aid Audits
The U.S. Department of Education is charged with oversight of the federal student aid programs and for ensuring institutional compliance with the HEA to prevent fraud, waste, and abuse. Institutions must demonstrate that they have adequate numbers of trained staff and sufficient resources to capably administer federal student aid programs. Institutions must also prove that they are financially responsible, which includes ensuring that they have appropriately trained staff with proper separation of duties, are current on debt obligations, and are otherwise financially stable. Institutional compliance with the laws and regulations governing the HEA Title IV aid programs is monitored through annual audits and periodic program reviews.
Schools must have financial and compliance audits performed each year by a licensed accountant. This is generally referred to as the “single audit” or the “A-133 audit” after the name of the Office of Management and Budget (OMB) document that provides auditors with instructions for how to complete this audit requirement for federal grant recipients. These annual audits, which are submitted to the Education Department upon completion, examine a broad range of institutional practices. Some of these practices may fall outside of the purview of the financial aid office but do have an impact on the institution’s eligibility to participate in federal student financial aid programs.
- Examples of institutional responsibilities that A-133 audits examine include:
- Compliance with the eligibility rules for each of HEA Title IV aid programs.
- Cash management and fund reconciliation practices.
- Compliance with institutional, student, and program eligibility requirements.
- Verification of certain data elements reported on the FAFSA, such as identity, income and family size.
- Compliance with student consumer information requirements (including, but not limited to, financial aid disclosures, campus crime and safety statistics, and athletics participation rates).
- Drug-Free Workplace and Civil Rights Compliance.
- Typical top audit findings for higher education institutions:
- Failure to take corrective action for previous findings.
- Miscalculations or missed deadlines for returning Title IV funds when students withdraw.
- Inaccurate/untimely reporting of student enrollment status.
- Pell Grant overpayment/underpayment.
- Improper management of Title IV aid credit balances on student accounts.
- Student loan entrance and exit counseling deficiencies.
- Verification violations.
- Improper certification of Direct Loans.
Program reviews, unlike audits, are performed by the Education Department. There is no set schedule for when an institution will have a program review, but they must be performed on a periodic basis. The Department is also required to prioritize program reviews for schools with certain risk characteristics, such as high student loan default rate, fluctuations in Pell Grant or Direct Loan volume, high student dropout rates, or issues identified by entities like accreditors, state licensing agencies, or students.
Program reviews can be comprehensive— looking at a schools’ overall compliance with all laws and regulations— or focused on just one or a few select areas of compliance. The most common program review findings are similar to those found in audits, except that program reviews frequently identify noncompliance with crime awareness requirements as well, which carries a penalty of significant fines for violations. Institutional compliance failures in any area, though, can result in liabilities that the school must repay if funds were improperly disbursed, in penalties like fines, or in the limitation, suspension, or even termination of participation in the HEA Title IV aid programs.
Financial Aid for Distance Education
Students can receive federal student aid funds for distance education courses, provided those courses belong to an otherwise Title IV-eligible program, and the school has been determined to have the capability to effectively deliver distance education programs by a Department-recognized accrediting agency with distance education included in its scope.
The Department of Education distinguishes between distance education and correspondence education. The major distinction is with respect to interaction; a correspondence course is one for which the school provides instructional materials and exams for students who do not physically attend classes at the school and who are studying independently. For federal student aid purposes, all correspondence education is distance education, but not all distance education is correspondence education.
There are no special limitations on the amounts or types of Title IV aid students in distance education programs may receive. However, a student enrolled in a correspondence course can only receive Title IV funds if the course is part of a program that leads to an associate’s, bachelor’s, or graduate degree; if the program leads to a certificate, the student is not eligible for aid for that course. There are also restrictions regarding cost of attendance for correspondence courses, generally limiting the COA to only tuition and fees. On the other hand, institutions are prohibited from making a distinction based on the mode of instruction when determining the cost of attendance for a student receiving all or part of their instruction through non-correspondence distance education.
In March, 2020, the Department granted flexibility—which they extended in May—for institutions switching from in-person to distance education due to COVID-19, granting broad approval for institutions to offer distance education for terms that included March 5, 2020 or that began on or between March 5 and December 31, 2020.
Distance education lends itself well to innovative learning models such as self-paced learning. However, financial aid rules were designed for programs that follow traditional calendar systems and can be difficult to apply to more innovative models. For instance, students in subscription-based programs who rely on financial aid are frequently prevented from working at their own pace because their financial aid disbursements do not align with their progression through their studies. The Department recently closed their public comment period on a proposed rule that would make the financial aid process more agile to better accommodate these types of learning models. The HEA is also long overdue for a reauthorization, which provides another opportunity for improvement.
Foreign Schools and Financial Aid for Distance Education
The HEA does not permit foreign Title IV-eligible institutions to offer distance education to U.S. students who receive Title IV funding. The Coronavirus Aid, Relief, and Economic Security (CARES) Act waives this restriction— retroactive to March 1 and for the duration of a declared emergency— in cases where the government of the nation in which the foreign institution is located declares a national emergency due to COVID-19. This restriction does not apply in cases where the student is a degree-seeking student at a U.S. institution and enrolled in a study abroad program at the foreign institution.
Key Challenges When Pivoting from Face-To-Face Instruction to Remote Instruction
There are several financial aid-related considerations when transitioning from in-person to distance education.
- For online program(s) that would enroll students from across the U.S., there are financial aid documentation requirements that must be provided in person or as a notarized copy. Institutions should be sure to update communications to include the notarized copy option for students who are too far away to provide documents in person and information on how students might find a notary. The Department of Education has granted temporary flexibility on the in-person or notary requirements for certain documents due to the difficulty of visiting campus or a notary public during the COVID-19 pandemic.
- If the shift to distance learning would take advantage of the flexibility of that modality to offer self-paced or subscription-based learning, or would make changes to the academic calendar, institutions should be sure to work with the financial aid office to discuss any financial aid implications. As noted earlier, the current rules for disbursing federal student aid do not align seamlessly with innovative learning models. The Department of Education has extended some COVID-19 related flexibilities with respect to standard terms through the end of the academic year that includes December 31, 2020, permitting adjacent terms to overlap.
- The COA may be different for an online program vs. an in-person program. Be sure your financial aid office is involved in discussions about moving programs online and what costs are associated with those changes so they can develop accurate COAs.
- A switch to providing online programs will likely require using electronic means of collecting financial aid documents, much of which contains personally identifiable information (PII). Be sure that whatever method(s) you set up to receive financial aid documentation electronically is compliant with the Department of Education’s cybersecurity requirements.
- Be aware that the CARES Act made funds available for students and institutions for expenses related to switching to distance education when that change is made due to COVID-19. Student emergency grants are available for expenses related to the disruption of campus operations due to COVID-19. Note that students who were enrolled in exclusively online programs when the national emergency was declared on March 13 are not eligible to receive these funds. Institutional CARES Act funds are available for institutional costs that arose as a result of significant changes to the delivery of instruction, including interruptions in instruction, due to COVID-19.
Suggested Resources and References
Policy Analyst, National Association of Student Financial Aid Administrators (NASFAA)