Chapter The Student Financial Aid

1 Programs

Summary
This chapter provides an overview of federally funded student
financial aid programs. The chapter begins with a discussion
of Title IV of the Higher Education Act, the legislation that
created these federal programs. The chapter also discusses
an institutional fiscal year and explains the terms “academic

Key Terms*

academic year gift aid

administrative cost allowance (ACA) Higher Education Act of 1965 as
award year amended (HEA)
campus-based programs Institutional Student Information
Record (ISIR)
Code of Federal Regulations (CFR)
master calendar
cost of attendance (COA)
personal identification numbers (PINs)
delivery system
reauthorization
Expected Family Contribution (EFC)
SAR Information Acknowledgement
Federal Pell Grant Program
self-help aid
Federal Register
Student Aid Report (SAR)
Fiscal Operations Report and
Application to Participate (FISAP) Title IV programs
Free Application for Federal Student
Aid (FAFSA)

year” and “award year.”

1.1 Title IV of the Higher Education Act

of 1965 and Federal Regulations
Title IV of the Higher Education Act of 1965, as amended
(HEA), authorizes the following programs:

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*Key terms are in boldface type when they first appear in the text.
 Chapter 1

♦ Federal Pell Grant,

♦ William D. Ford Federal Direct Loan (Direct Loan),

♦ Federal Family Education Loan (FFEL),

♦ Federal Supplemental Educational Opportunity Grant

(FSEOG),

♦ Federal Work-Study (FWS), and

♦ Federal Perkins Loan.

These programs are collectively known as Title IV programs.

They are administered by the U.S. Department of Education
(ED) and provide some $50 billion annually in financial
assistance to eligible students enrolled in eligible
postsecondary programs of study. Title IV programs are
governed by the HEA and by policies and regulations
published by ED.

Reauthorizing and Amending the HEA

Approximately every six years, Congress reviews all the Title
IV programs authorized by the HEA to ensure that they are
serving the purposes for which they are intended. After
reviewing the programs, Congress decides whether to
reauthorize them (that is, allow the programs to continue)
and, if so, what changes should be enacted to serve students
and taxpayers properly and efficiently.

Congress also can make changes to (or amend) the HEA

between these periodic reauthorizations. This happens
when Congress modifies particular HEA provisions rather than
the entire law.

Title 34 of the Code of Federal Regulations

Reference: ED implements the HEA through regulations. Title IV
• http://ifap.ed.gov regulations supplement the HEA; however, regulations cannot
supersede any part of the law. Regulations affecting Title IV
programs are contained in Title 34 of the Code of Federal
Regulations (CFR). The sections of Title 34 that most
frequently affect how schools administer federal financial aid
programs are in Parts 600 and higher. When ED issues
regulations, they are published in the Federal Register. ED
Reference: posts the regulations on its Information for Financial Aid
• Compilation of
Student Financial Aid
Regulations (latest
1-2 version) The Blue Book June 2001
 Student Financial Aid Programs

Professionals (IFAP) Web site. ED also publishes an annual

compilation of current regulations called the Compilation of
Student Financial Aid Regulations. Additions or supplements
to the Compilation are published and posted to IFAP quarterly,
as needed.

1.2 Family Contribution, Financial Aid

Application, and Delivery System

Expected Family Contribution (EFC)

The basic premise underlying Title IV programs is that a
student and the student’s family have primary responsibility
for paying for the student’s postsecondary education.
Because the programs are intended to help students with
financial need, eligibility for financial assistance from most of
the programs is need based. Congress developed an
Expected Family Contribution (EFC) formula to determine
the financial strength of a student’s family and the student’s
need for Title IV assistance.

Free Application for Federal Student Aid (FAFSA)

To apply for Title IV financial aid funds, students must submit
a Free Application for Federal Student Aid (FAFSA).
Most continuing postsecondary students may file a condensed
Renewal FAFSA. The FAFSA and Renewal FAFSA collect
financial and other information from the student and the
student’s spouse for independent students. They also collect
information from a dependent student and his or her
parent(s). This information is used to calculate the student’s
EFC. The EFC represents the amount of money a student’s
family is expected to contribute toward the cost of the
student’s postsecondary education. The EFC is used with the
school’s cost of attendance (COA) in determining an
eligible student’s need and the amount of aid that the student
receives from each of the Title IV aid programs.

The EFC is sent to the student on the Student Aid Report

(SAR) or the SAR Information Acknowledgement.
Schools receive an electronic version of the same information,
called the Institutional Student Information Record
(ISIR).
Reference:
• http://fafsa.ed.gov

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All students (undergraduate and graduate) can complete a

paper or Web-based version of the FAFSA. FAFSA on the Web
is a dedicated Web site where students can apply using the
Internet. Schools can also transmit students’ FAFSAs through
ED’s Electronic Data Exchange (EDE). Students who have
previously applied for federal financial aid may use the
condensed Renewal FAFSA to file. The Renewal FAFSA can be
completed on paper or by using Renewal FAFSA on the Web.

Federal law mandates that the FAFSA be developed according

*See section 1.10 of this
chapter for more
to the timeline established in the master calendar.* This
information. ensures that delivery of federal student aid is accomplished in
a timely way.

Delivery System
The “delivery system” refers to the process by which
students apply for federal financial aid, are awarded federal
funds, and use those funds to pay the costs of attendance
they incur when they enroll in an eligible program of study.

Title IV programs may be categorized as either “gift aid” or

“self-help aid.” Gift aid consists of grants and scholarships
that are given to students; it does not have to be repaid. Self-
help aid takes the form of loans (which must be repaid) and
work-study (which pays students wages for hours worked at
jobs provided on campus or off campus).

Sections 1.3 through 1.7 of this chapter provide a brief

overview of ED’s federal financial aid programs. For more
complete information, please refer to the Student Financial
Aid Handbook.

Personal Identification Numbers (PINs)

Students who apply for Title IV federal financial aid are eligible
to obtain personal identification numbers (PINs). PINs
are used to electronically identify individual aid applicants
online, and they also can be used to create electronic
signatures.

Students who use FAFSA on the Web to apply for federal aid
and are first-time FAFSA filers are automatically sent PINs. A
Reference: student can also request a PIN by accessing ED’s PIN Web
site. PINs are sent to students through the U.S. Postal Service.
• http://pin.ed.gov

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 Student Financial Aid Programs

ED’s PIN Web site can also be used to request an additional

copy of the student’s PIN, change the student’s PIN mailing
address, request to be assigned a new PIN, and obtain general
information about PINs.

With a PIN, a student can:

♦ electronically sign a FAFSA or Renewal FAFSA,

♦ make online corrections to his or her FAFSA data,

♦ obtain up-to-date Direct Loan account information,

*Access America for ♦ access his or her Access America for Students* account,
Students was a pilot
program during the 1999- and
2000 school year. The
pilot has been ♦ obtain current, reported information from the National
discontinued.
Student Loan Data System (NSLDS) about his or her
federal student aid history.

1.3 Federal Pell Grant Program

Reference:
Federal Pell Grants are gift aid and are available to eligible
• Student Financial Aid
Handbook, Volume 3: Pell undergraduate students who have not yet received a
Grant Program bachelor’s degree or professional degree, are enrolled in a
• HEA, Part A, Section 401 degree or certificate program, and meet other program
• 34 CFR Part 690 eligibility requirements, including financial need.

ED, on a case-by-case basis, can provide Federal Pell Grants to

students who have bachelor’s degrees. Those students must
be enrolled:

♦ at least half time at a school that doesn’t offer a

bachelor’s degree in education,

♦ in a post-baccalaureate program not leading to a

graduate degree, and

♦ in state-required courses to obtain an initial professional

certification or licensing credential required to teach in
that state.

Various components determine the amount of a student’s

*The Higher Education
Amendments of 1998
award, including EFC; COA (tuition, fees, room and board,
include a provision for a books and supplies,* and so forth); enrollment status; and the
reasonable allowance for
the documented
purchase or rental of a
June 2001computer.
personal The Blue Book
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length of the program of study. Funds that an eligible student

receives from this program do not have to be repaid. Each
participating institution receives an administrative cost
allowance (ACA) for administering the Federal Pell Grant
Program unless the school declines it.

1.4 The Campus-Based Programs

Reference:
The Federal Perkins Loan, Federal Work-Study (FWS), and
• Student Financial Aid
Handbook, Volume 4:
Federal Supplemental Educational Opportunity Grant (FSEOG)
Campus-Based Common Programs are referred to as campus-based programs
Provisions because ED allocates these funds to participating institutions
on the basis of their Fiscal Operations Reports and
• 34 CFR Part 673 Applications to Participate (FISAPs). The schools then
manage the programs and award funds to students on behalf
of ED. Students must complete a FAFSA or Renewal FAFSA
each year to apply for these funds. Schools award the funds
to eligible students according to federal laws and regulations.
Each participating institution may claim an ACA for
administering each campus-based program.

Federal Perkins Loan Program

Reference: Federal Perkins Loans are low-interest (5 percent) student
• HEA, Part E loans that participating schools make to eligible
• 34 CFR Part 674 undergraduate and graduate students. No interest accrues on
a loan while a student is enrolled at least half time in an
eligible program at an eligible school. A school must give
priority to students who demonstrate exceptional financial
need as defined by the school.

Federal Work-Study (FWS) Program

Reference: The Federal Work-Study (FWS) Program provides on-campus
• HEA, Part C jobs and
• 34 CFR Part 675 off-campus jobs for undergraduate and graduate students.
Students can be employed in a variety of positions, including
off-campus, community-service jobs. Students must be paid at
least the current federal minimum wage and, in most cases,
the institution or off-campus employer must pay a portion of
their wages.

As of the 2000-01 award year, which began July 1, 2000, a

school must use at least 7 percent of its total FWS allocation
for an award year to pay students employed in community-
service activities, unless ED approves a waiver. Further, at

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 Student Financial Aid Programs

least one community-service project must be in reading

tutoring or family literacy and must employ at least one FWS
student.

America Reads Challenge

Schools are encouraged to place FWS students as reading
tutors of preschool-age children and children in elementary
school as part of their efforts to support the America Reads
Challenge. For schools that participate, ED authorizes a
100 percent federal share of such students’ FWS wages.
Students must perform the work for the school itself; a
federal, state, or local public agency; or a private, nonprofit
organization.

America Counts
ED launched America Counts, which is similar to the America
Reads Challenge, in July 1999. The program places FWS
students as mathematics tutors for students in elementary
school through ninth grade. The tutoring can be, but does not
have to be, in a school setting. The program is another way
for schools to meet FWS Program community-service
expenditure requirements. For schools that participate, ED
authorizes a 100 percent federal share of such students’ FWS
wages.

Federal Supplemental Educational Opportunity Grant (FSEOG)

Program

Reference:
Federal Supplemental Educational Opportunity Grants
• HEA, Part A, Sections
(FSEOGs) are gift aid and do not have to be repaid. These
413A-413E funds are for undergraduate students with financial need who
• 34 CFR Part 676 have not yet received a bachelor’s degree or a first
professional degree. When selecting FSEOG recipients, a
school must make awards first to applicants with exceptional
financial need and give priority to applicants who receive
Federal Pell Grants.

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1.5 Major Loan Programs

The largest amounts of Title IV funds come from the William
D. Ford Federal Direct Loan Program and the Federal Family
Education Loan (FFEL) Program.

William D. Ford Federal Direct Loan Program

Reference:
The William D. Ford Federal Direct Loan Program (usually
• Student Financial Aid
Handbook, Volume 8:
referred to as the Direct Loan Program) consists of:
Direct Loan and FFEL
Programs ♦ the Direct Stafford/Ford Loan (Direct Subsidized Loan)
• HEA, Part D Program,
• 34 CFR Part 685
♦ the Direct Unsubsidized Stafford/Ford Loan (Direct
Unsubsidized Loan) Program,

♦ the Direct PLUS (Direct PLUS Loan) Program (for parents

of eligible dependent students), and

♦ the Direct Consolidation Loan (Direct Consolidation

Loan) Program.

Eligible students may borrow Direct Subsidized Loans and

Direct Unsubsidized Loans, while parents of eligible
dependent students may borrow Direct PLUS Loans. Direct
Consolidation Loans are available to both student and parent
borrowers.

The federal government makes Direct Loans to eligible

undergraduate and graduate students and parents of
dependent undergraduate students through financial aid
offices at participating schools. Direct Subsidized Loans and
Direct Unsubsidized Loans are made to eligible undergraduate
and graduate students enrolled at least half time in an eligible
program of study, and Direct PLUS Loans are made to eligible
parents of dependent undergraduate students enrolled at
least half time in an eligible program of study. The loans can
also be used to pay for course work necessary as a
prerequisite to enroll in an eligible program or for teacher
certification programs.

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 Student Financial Aid Programs

*In some cases, a student Interest Subsidy

may be charged interest
on a subsidized loan Borrowers are not charged interest on Direct Subsidized Loans
while enrolled half time at during certain periods, such as when they are enrolled at least
an eligible school. An half time and during grace periods and deferment periods.*
example would be when a
student’s loan has
entered repayment and Because the federal government subsidizes the interest on
the student returns to students’ Direct Subsidized Loans, students must show
school, but the student financial need to qualify for these loans. The student’s COA,
does not receive an in-
school deferment on the EFC, and the amount of other aid the student is receiving
loan. determine the loan amount.

Eligibility for unsubsidized loans (Direct Unsubsidized Loans

and Direct PLUS Loans) is not determined on the basis of
financial need. All or a portion of a Direct Unsubsidized Loan
or Direct PLUS Loan can replace a student’s EFC and/or the
parent’s portion of the EFC. Student borrowers are charged
interest on Direct Unsubsidized Loans and parent borrowers
are charged interest on Direct PLUS Loans throughout the
lives of the loans.
Reference: Every student borrower is subject to annual and aggregate
• Student Financial Aid loan limits for Direct Subsidized Loans and Direct
Handbook, Volume 8:
Direct Loan and FFEL
Unsubsidized Loans. The amount of the annual and/or
Programss aggregate limit is determined by the student’s grade level in
*Certain health college and his or her dependency status.* A parent may
professions students
may be eligible for
borrow a Direct PLUS Loan up to the dependent student’s cost
higher annual and of attendance minus estimated financial aid (from all other
aggregate loan limits. resources, including other loan programs).

ED’s Direct Loan Servicing Center (DLSC) services all Direct

Loans and collects payments from borrowers.

Direct Consolidation Loan

A Direct Consolidation Loan is designed to help student and
parent borrowers simplify loan repayment by consolidating
their federal education loans so that they make only one
payment each month. The Direct Loan Consolidation Program
offers a number of repayment options. Borrowers may
consolidate subsidized and/or unsubsidized Direct Loans,
Direct PLUS Loans, as well as most other federal student loans
including loans received under the Federal Family Education
Loan (FFEL) Program and the Federal Perkins Loan Program.

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Federal Family Education Loan (FFEL) Program

The Federal Family Education Loan (FFEL) Program consists of
Reference: subsidized and unsubsidized Federal Stafford Loans (for
• Student Financial Aid students), Federal PLUS Loans (for parents), and FFEL
Handbook, Volume 8:
Direct Loan and FFEL Consolidation Loans (for both students and parents).
Programs Participating lending institutions, such as banks and credit
• HEA, Part B unions, make these loans, which are guaranteed by state or
• 34 CFR Part 682 national guaranty agencies and insured by the federal
government. FFEL Program loans are made to eligible
undergraduate and graduate students enrolled at least half
**In some cases, a
student may be charged time in an eligible program or, in the case of Federal PLUS
interest on a subsidized Loans, to the eligible parents of dependent undergraduate
loan while enrolled half students enrolled at least half time in an eligible program.
time at an eligible school.
An example would be
when a student’s loan Interest Subsidy
has entered repayment
and the student returns to The federal government pays the interest on subsidized
school, but the student
does not receive an in- Federal Stafford Loans during certain periods, such as when a
school deferment on the borrower is enrolled in school, during a deferment,** and
loan. during a borrower’s grace period preceding repayment.
A borrower makes payments to his or her lender (or to a
servicing agent employed by the lender), unless the lender
sells the borrower’s loan to a secondary market. Then, the
secondary market becomes the holder of the loan, and the
borrower makes his or her payments to the new loan holder.

Because the federal government pays the interest on

subsidized Federal Stafford Loans, students must show
financial need to qualify for these loans. The student’s COA,
EFC, and the amount of other aid the student is receiving
determine the loan amount.

Eligibility for unsubsidized loans (unsubsidized Federal

Stafford Loans and Federal PLUS Loans) is not determined on
the basis of need, and all or a portion of these loans can
replace a student’s EFC. A borrower is responsible for paying
Reference: all interest on an unsubsidized Federal Stafford Loan or a
• Student Financial Aid Federal PLUS Loan, with interest beginning to accrue on the
Handbook, Volume 8: date the loan is disbursed.
Direct Loan and FFEL
Programs
Every student borrower is subject to annual and aggregate
loan limits for subsidized Federal Stafford Loans and
unsubsidized Federal Stafford Loans. The amount of the
annual and/or aggregate limit is determined by the student’s
*Certain health
professions students
may be eligible for
higher annual and
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 Student Financial Aid Programs

grade level in college and his or her dependency status.* A

parent may borrow a Federal PLUS Loan up to the dependent
student’s cost of attendance minus estimated financial aid
(from all other resources, including other loan programs).

FFEL Consolidation Loan

A FFEL Consolidation Loan is designed to help student and
parent borrowers consolidate several types of federal student
loans with various repayment schedules into one loan.
Borrowers make only one payment a month for all loans that
were consolidated in the FFEL Consolidation Loan. Students
can consolidate subsidized and unsubsidized Stafford loans
and parents can consolidate PLUS loans as well as most other
federal student loans. Borrowers can only receive one
consolidation loan. Those loans that were subsidized retain
their eligibility for subsidies.

1.6 Other Title IV Programs

Leveraging Educational Assistance Partnership (LEAP) Program

(formerly State Student Incentive Grant [SSIG] Program)
Reference:
The Leveraging Educational Assistance Partnership (LEAP)
• Student Financial Aid
Program assists states in providing grants to eligible students
Handbook, Volume 9: who attend postsecondary schools and who have financial
State Grant Programs need. Each state receives an annual allocation of federal
• HEA, Part A, Section 415 LEAP funds that must be matched with a certain amount of
• 34 CFR Part 692 state funds. The name of the program, amount of funds
• DCL GEN-98-28 available, application procedures, and other aspects of the
• SPL LEAP-00-01 LEAP Program may vary from state to state. For specific
• DPL LEAP-00-02 information about the LEAP Program in your state, contact
your state education agency. The LEAP Program formerly was
the State Student Incentive Grant (SSIG) Program.

Special Leveraging Educational Assistance Partnership (SLEAP) Program

When Congress appropriates amounts in excess of $30 million
for the LEAP Program, those excess funds must be applied to
the Special Leveraging Educational Assistance Partnership
(SLEAP) Program. The SLEAP Program authorizes states to
use the funds for any or all of the following eight activities:

♦ increasing the dollar amount of grants under the LEAP

Program;

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♦ carrying out transition programs from secondary school

to postsecondary education for needy students;

♦ carrying out a financial aid program for needy students

who wish to enter careers in information technology or
other fields determined by the state to be critical to its
workforce needs;

♦ making funds available for community service work-

study activities for needy students;

♦ creating a scholarship program for needy students who

wish to be teachers;

♦ creating a scholarship program for needy students who

plan to major in mathematics, computer science, or
engineering;

♦ carrying out early intervention, mentoring, and career

education programs for needy preschool, elementary-
school, or secondary-school students; and

♦ awarding merit or academic scholarships to needy

students.

Postsecondary students receiving aid through a SLEAP

program must meet general student eligibility requirements
and demonstrate financial need.

The maximum amount the federal government contributes

(the federal share) under the SLEAP Program is 33 1/3
percent. Funds are allocated to states in the same manner as
LEAP, and these funds pay the federal share of costs for any
or all of those authorized program activities. States are
required to assure ED that they are meeting the nonfederal-
share matching terms according to program requirements.

Robert C. Byrd Honors Scholarship Program

Reference:
This program provides federal grants to states so that
• Student Financial Aid scholarships may be made to exceptionally able students for
Handbook: Volume 9 postsecondary study. The purpose of the program is to
State Grant Programs promote academic excellence and achievement. Each state
• HEA, Part A, Section establishes its own application procedures for Byrd
419 A-K
Scholarships. For specific information about how the Byrd
• 34 CFR Part 654
Scholarship Program is administered in your state, contact
your state education agency.

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 Student Financial Aid Programs

Gaining Early Awareness and Readiness for Undergraduates

Program (GEAR UP)

Reference: Gaining Early Awareness and Readiness for Undergraduates

• HEA, Part A, Section Program (GEAR UP) replaced the National Early
404 A-H
*Please note that the Intervention Partnership and Scholarship Program (NEISP).*
former NEISP
provisions make up GEAR UP provides a range of early-intervention services to
only a small part of the middle schools serving a high percentage of low-income
GEAR UP provisions.
students. Partnerships are required to include:

♦ a degree-granting institution of higher education,

♦ a middle school in which 50 percent of the students are

eligible for free or reduced-cost lunch,

♦ high schools where these students will ultimately enroll,

and

♦ at least two community organizations.

Certain GEAR UP provisions allow states to receive grants

that:

♦ provide or maintain a guaranteed amount of financial

assistance necessary to permit eligible, low-income
students who obtain high school diplomas or the
equivalent to attend institutions of higher education;

♦ provide financial incentives in cooperation with local

educational agencies, institutions of higher education,
community organizations, and businesses; and

♦ provide a variety of early-intervention services.

Academic Achievement Incentive Scholarship Program

Reference: The purpose of the Academic Achievement Incentive

• HEA, Part A, Sections Scholarship Program is to help financially needy students who
406A-407E have demonstrated their academic abilities. The scholarships
are for students who are eligible for Federal Pell Grants and
graduate after May 1, 2000 in the top 10 percent of their high
school graduating class. The maximum scholarship a student
can receive is equal to the amount of the student’s eligibility
for a Federal Pell Grant, which can result in doubling the
student’s grant amount. This program is unfunded for the
2000-01 award year.

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1.7 Other Federal Student Aid Programs

In addition to the Title IV programs described previously, there
are other federal financial assistance programs for students.

AmeriCorps
Reference: AmeriCorps, a program of national and community service,
• provides
http://www.americorps.or
education awards of up to $4,725 a year. Education awards
vary depending on whether the student participates on a full-
time or part-time basis. Students participating in AmeriCorps
usually receive a living allowance on a regular basis. This
living allowance is not considered an hourly wage or salary.

Living allowances are taxable by the Internal Revenue Service

(IRS) but are an exclusion from the income used to calculate a
student’s EFC for purposes of awarding Title IV aid. If the
stipend is included in the student’s AGI, it is to be included on
Worksheet C of the 2002-2003 FAFSA. Also, a student
participating in the Federal Work-Study Program (FWS) is
ineligible to receive a living allowance.

Wages earned from FWS will be reported on the appropriate

worksheet and excluded from the AGI need analysis
calculation. In most cases, according to the IRS, educational
awards are subject to income taxes in the calendar year in
which they are used. This taxable amount is reported on form
1099. When the student files a FAFSA for the following year,
the amount of the AmeriCorps award received in the base
year (2001 calendar year for the 2002-2003 FAFSA) and
included in that year’s AGI is to be excluded from the need
analysis calculation and included on line 4 of Worksheet C of
the 2002-2003 FAFSA.

Individuals may work before, during, or after their

postsecondary education and can use the funds either to pay
current or future education expenses or to repay federal
student loans. Participants must be high school graduates,
have GEDs, or be working toward their GEDs. For more
information students can call 1-800-942-2677 or write to:

The Corporation for National Service

1201 New York Avenue, NW
Washington, DC 20525

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Programs Funded by the U.S. Department of Health and Human

Services (HHS)
The U.S. Department of Health and Human Services (HHS)
Reference: offers a variety of financial aid programs for students who are
• http://www.hrsa.dhhs. interested in becoming health professionals, such as
gov/bhpr/dsa physicians, nurses, and dentists. Some of the programs
require students to make a commitment to work as a health
care provider in an area of need, such as in a geographically
underserved area.

1.8 Federal Education Tax Credits

Reference:
• 26 CFR, Part 1, 1.25A-3,
The Hope Scholarship
of January 6, 1997,
NPRMNPRM
The Hope Scholarship is really a federal tax credit authorized
• DCL ANN-98-16
by Congress in the Taxpayer Relief Act of 1997. For families
with students in the first two years of postsecondary school,
taxpayers are eligible for a tax credit equal to 100 percent of
the first $1,000 of tuition and fees and 50 percent of the
second $1,000 (the amounts are indexed for inflation after
Reference: 2001). The credit became available on a per-student basis
• http://ed.gov/inits/hope for net tuition and fees (less grant aid) paid for college
enrollment after December 31, 1997. The credit is phased out
for joint filers who have between $80,000 and $100,000 of
adjusted gross income and for single filers who have between
$40,000 and $50,000 (indexed after 2001). The credit can be
claimed in two taxable years (but not beyond the year when
the student completes the first two years of college) for any
individual enrolled on at least a half-time basis for any portion
of the year.

Schools must report certain information to students and the

Internal Revenue Service (IRS), such as students’ tuition and
fees. Specific institutional reporting requirements are
published by IRS.

Lifetime Learning Credit

The Lifetime Learning Credit is also a federal tax credit
authorized in the Taxpayer Relief Act of 1997. It is for
Reference:
students who have completed their first two years of college
• 26 CFR, Part 1, 1.25A-
4, of January 6, 1997,
or are enrolled in classes part time to improve or upgrade
NPRM their job skills. Families receive a 20 percent tax credit for the
• DCL ANN-98-16 first $5,000 of tuition and fees through 2002, and for the first
$10,000 thereafter. The credit is available for net tuition and
Reference:
• http://ed.gov/inits/hope
June 2001 The Blue Book
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Chapter 1

fees (less grant aid) paid for postsecondary enrollment after

June 30, 1998. The credit is available on a per-taxpayer
(family) basis, and it is phased out at the same income levels
as the Hope Scholarship.

Like the Hope Scholarship, schools must report certain

information to students and the IRS, such as students’ tuition
and fees. Specific institutional reporting requirements are
published by the IRS.

1.9 Coordination of Financial Aid Resources

A student receiving federal student aid can only receive
financial assistance, from all available resources, up to his or
her COA. Financial assistance can be received from a variety
of resources, including veteran’s education benefits,
scholarships from outside sources, and nonfederal student
loans.

Students who receive outside sources of financial assistance

are required to report the receipt of that aid to the financial
aid office. This is to ensure that the student does not receive
more Title IV assistance than allowed under federal law. For
this same reason, it’s important that the financial aid office
and the fiscal office coordinate information on funds received
for financial assistance.

1.10 The Fiscal Activity Calendar

Fiscal activities managed by postsecondary institutions occur
at various points during the academic year, the award year,
and the fiscal year.

The Academic Year

The HEA establishes the definition of an academic year. ED
regulations guide schools in complying with the definition.

Reference: Every eligible school program, including graduate programs,

• Student Financial Aid must have a defined academic year that contains a minimum
Handbook, Volume 2: of 30 weeks of instructional time. In addition, for
Institutional Eligibilityy
and Participation
undergraduate programs, an academic year must contain
• HEA, Part G, Section
30 weeks of instructional time during which a full-time
481 undergraduate student must be expected to complete at least
• 34 CFR 668.2(b)(1) 24 semester or trimester hours, 36 quarter hours, or 900 clock

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hours, as appropriate. A school may determine the amount of

course work a full-time graduate or professional student is
expected to complete over an academic year.

To determine the number of weeks of instructional time, a

school must count the period that begins on the first day of
classes and ends on the last day of classes or examinations.

Reduction of Academic Year

Reference: ED may grant waivers of the 30-week requirement for schools

• 34 CFR 668.3 that provide two-year or four-year programs of study for
which they award associate or baccalaureate degrees. ED
may grant a reduction in the length of an academic year.

♦ If a reduction is approved, a school is permitted to have

an academic year of less than 30 weeks of instructional
time (but not less than 26 weeks) without reducing the
amount of Title IV funds that a student enrolled in an
eligible program is eligible to receive for an entire
academic year.
Reference:
• 34 CFR 668.3(c)(1)(i-iv) A reduction is available to schools that want to begin or
continue to operate with a reduced academic year on a long-
term basis. This reduction must be renewed each time a
school is required to apply for recertification to award federal
financial aid.

When evaluating a school’s application to reduce the length of

an academic year, ED will consider such factors as:

♦ any unique circumstances that justify granting the

request,

♦ the school’s compliance with procedures for awarding

aid and disbursement based on the academic-year
requirements of the HEA,

♦ the approval of the academic year by the school’s

accrediting agency or state agency, and

♦ the hours of attendance and other course work that a

full-time student is required to complete in the
academic year.

ED has granted this waiver to very few schools. Schools can

request the waiver by two methods. One method is for a

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 Chapter 1

school to submit its request to either of the following

addresses:

By U.S. Postal Service: U.S. Department of Education

Case Management and Oversight Service
P.O. Box 44805
L’Enfant Plaza Station
Washington, DC 20026-4805

By commercial overnight mail or courier delivery:

U.S. Department of Education

Case Management and Oversight Service
7th and D Streets, SW
GSA Building, Room 5643
Reference: Washington, DC 20407
• http://eligcert.ed.gov
The other method is for a school to submit its request
electronically through the World Wide Web at
http://eligcert.ed.gov. At the Web site, the school must
complete questions 1 and 69 and the signature page.
Reference:
With either method, the school must submit documentation
• See Appendix D for
further details on Case
supporting its request for the waiver. If a school has
Management Teams. questions about the waiver, the school should contact the
Case Management Team that serves its state.

A school may have different academic years for different

programs, but must use the same academic year definition
for:

♦ calculating all Title IV awards for students enrolled in a

particular program and

♦ all other Title IV program purposes, such as certifying

loan deferments.

Clock-Hour and Term-Based Programs

For educational programs using semesters, trimesters, or
Reference:
• 34 CFR 668.8(b)(3)(ii)
quarters or clock hours, a week of instructional time is defined
as any consecutive seven-day period in which at least one day
of regularly scheduled instruction, examinations, or
preparation for examinations occurs.

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 Student Financial Aid Programs

Nonterm Credit-Hour Programs

For educational programs measured in credit hours without
Reference: standard terms (semesters, trimesters, or quarters), a week of
• 34 CFR 668.8(b)(3)(ii) instructional time is defined as any consecutive seven-day
period in which at least 12 hours of instruction, examinations,
or preparation for examination occurs.

The Award Year

Funds are appropriated by Congress for a specific financial aid
Reference:
award year. That year is the 12-month period during which
• Student Financial Aid
Handbook: Volume 2
postsecondary institutions disburse Title IV aid and other
Institutional Eligibility federal financial aid funds to students. The award year runs
and Participation from July 1 of one calendar year to June 30 of the next
• HEA, Part G, Section calendar year.
481
For example, the 2001-02 award year begins on July 1,
2001 and ends on June 30, 2002. Immediately following
the end of the award year, schools must file reports on that
award year’s activities.

For any award year, financial aid application processing

begins on January 1 of the calendar year in which the award
year begins; financial aid payment processing ends on
September 30 of the calendar year in which the award year
ends.

♦ For example, for the 2001-02 award year, processing

begins on January 1, 2001 and ends on September 30,
2002.

The Fiscal Year

The fiscal year is defined by the institution. Examples of
commonly used fiscal year periods are:

♦ January 1 to December 31 (the calendar year),

♦ July 1 to June 30 (the financial aid award year), and

♦ October 1 to September 30 (the federal fiscal year).

For many institutions, the school fiscal year differs from the
federal fiscal year.

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 Chapter 1

The Federal Master Calendar

To ensure timely delivery of Title IV funds to students, federal
law requires that ED adhere to a master calendar when
developing required publications, communicating with
postsecondary institutions, issuing regulations, and
performing other activities necessary to both ED’s and the
institutions’ administration of Title IV programs.

See page 1.18 for the mandated FAFSA development schedule

and page 1.19 for the master allocation calendar for Federal
Pell Grant and campus-based aid.

The master calendar requires that regulations affecting a

given award year be published by ED no later than November
1 of the preceding calendar year.

♦ For example, for the 2001-02 award year, all final

regulations had to be issued on or before November 1,
*Please note, although it 2000. These regulations may take effect no earlier than
is generally true that the
regulations will not take July 1, 2001.*
effect before July 1,
2001, on occasion there For allocations of Federal Pell Grant and other campus-based
are exceptions.
funds, the law also mandates that ED adhere to the following
master calendar dates in the year preceding the award year.

♦ August 1—distribution of application for campus-based

funds (Fiscal Operations Report and Application to
Participate [FISAP]) to institutions

♦ October 1—final date for institutions to submit FISAP to

ED

♦ November 15—ED sends FISAP edits to institutions

♦ December 1—appeal procedures received by institutions

♦ December 15—institutions return any FISAP edits to ED

♦ February 1—institutions receive tentative ED award

levels for campus-based programs; institutions also
Reference: receive final Federal Pell Grant Program Payment and
• HEA, Part G, Section 482 Disbursement Schedule

♦ February 15—closing date for institutional appeals of

campus-based awards to be received by ED

♦ March 1—appeals process completed

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♦ April 1—final award notifications for campus-based

programs sent to institutions by ED

♦ June 1—Federal Pell Grant Program initial authorization

levels sent to schools using the advance payment
method

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