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Citations: (R)668.165 AsOfDate: 12/31/95

Disbursing funds. (a) Method of payment. (1) An institution must notify a student or, in the case of a PLUS loan, the student's parent of the amount of title IV, HEA program funds the institution can expect to receive, and how and when those funds will be paid. (2) If the institution chooses to disburse to the student or the student's parent by initiating an electronic funds transfer to the bank account designated by the student or parent, as applicable, the institution must obtain authorization from the student or parent, as applicable, to disburse by that method. (3) An institution must follow the disbursement procedures in Sec. 675.16 for paying a student his or her wages under the FWS Program. (4) If an institution uses student accounts, an institution must disburse a Direct Loan Program Loan by crediting the student's account. (b) Crediting a student's account at the institution (1) General. An institution may disburse title IV, HEA program funds by crediting the student's account at the institution. Except as provided in paragraph (e) of this section, in crediting the student's account with title IV, HEA program funds, the institution may use those funds only to satisfy allowable charges described under paragraph (b)(3) of this section for the current award year or period of enrollment. An institution must notify expeditiously a student or parent borrower in writing or by equivalent electronic means that the institution has credited the student's account with Direct Loan, FFEL, or Federal Perkins Loan program funds. If an institution notifies a student or parent electronically, it must request the student or parent to confirm the receipt of the notice and maintain a record of that confirmation. (2) Student account balances. Unless otherwise authorized, by a student or parent borrower, whenever an institution applies title IV, HEA program funds to a student's account and determines that an amount of those funds exceeds, or exceeded, the amount of allowable charges the institution assessed the student, the institution must pay that balance directly to the student, or in the case of a PLUS loan to the parent borrower, as soon as possible but-(i) For students enrolled at the institution at any time during the period beginning July 1, 1995 and ending June 30, 1996, within 21 days of the later of-(A) The date that balance occurs; (B) The first day of classes of a payment period or period of enrollment, as applicable; or (C) The date the student, or parent borrower rescinds his or her authorization under paragraph (d) of this section; and (ii) For students enrolled at the institution on or after July 1, 1996, within 14 days of the later of the events described

in paragraph (b)(2)(i)(A), (B), or (C) of this section. (3) Allowable charges. For the purposes of this section, allowable charges include-(i) Tuition and fees; (ii) Board, if the student contracts with the institution for board; (iii) Room, if the student contracts with the institution for room; and (iv) If an institution obtains the student's or parent's authorization under paragraph (d) of this section-(A) Other cost-of-attendance charges, as provided under section 472 of the HEA, included in that authorization; and (B) Other institutional charges that a student incurs at his or her discretion. (4) Holding student funds. (i) Except as provided in paragraph (b)(4)(ii) of this section, an institution, as a fiduciary for benefit of a student, may hold student funds from the title IV, HEA programs in excess of institutional charges included in paragraph (b)(3) of this section, if the student, or in the case of a PLUS loan the parent borrower, authorizes the institution to retain the excess funds to assist the student in managing those funds. If an institution chooses to hold excess student funds, the institution-(A) Must identify the student and the amount of the funds the institution holds for that student in a subsidiary ledger account designated for that purpose; (B) Must maintain, at all times, cash in its bank account for an amount at least equal to the amount of the funds the institution holds for the student; and (C) May retain any interest earned on the student's funds. (ii) If the Secretary determines that an institution has failed to meet the standards of financial responsibility under Sec. 668.15, an institution may not hold a student's excess funds for this purpose. (c) Early payments. (1) An institution may not make a payment to a student for a payment period or period of enrollment, as applicable, until the student is enrolled for classes for that period. (2) Except as provided in paragraph (c)(3) of this section, the earliest an institution may directly pay, or credit the account of an enrolled student with title IV, HEA program funds, or in the case of a PLUS Loan pay the parent borrower is-(i) 10 days before the first day of a payment period or period of enrollment, as applicable; and (ii) For second and subsequent disbursements of loan funds under the Direct Loan and FFEL programs, 10 days before the first day of a semester, term, or other period of enrollment for which that disbursement is intended. (3) Pursuant to Sec. 682.604(c) and Sec. 685.303(b)(4), if a student is enrolled in the first year of an undergraduate program of study and the student has not previously received an FFEL or Direct Loan Program loan, the institution may not release to the student for endorsement the first installment of his or her FFEL or Direct Loan Program loan, as applicable, until 30 days after the first day of the student's classes. (d) Student authorization. (1) An institution must

obtain from a student or parent, as applicable, written authorization allowing the institution to-(i) Disburse title IV, HEA program funds by initiating an electronic funds transfer as provided in paragraph (a)(2) of this section; (ii) Use the student's or parent's title IV, HEA program funds to pay for other charges as provided in paragraph (b)(3)(iv) of this section; or (iii) Hold excess student funds under paragraph (b)(4) of this section. (2) In obtaining authorization for any of these activities, an institution-(i) May not require the student or parent to provide that authorization; and (ii) Must allow the student or parent to rescind that authorization at any time. (3) The authorization granted to an institution is valid for the award year or period of enrollment in which the institution obtains that authorization. The Secretary considers that initial authorization to continue to be valid provided that the institution notifies the student or parent of the provisions regarding the student's or parent's current authorization prior to conducting any of the activities that require that authorization for any subsequent award year or period of enrollment. The institution's notice to the student or parent must-(i) In a plain and conspicuous manner, explain those provisions, including an explanation regarding any interest that the institution earns on the student's funds and whether the institution will provide that interest to the student; and (ii) Provide the student or parent with the opportunity to cancel or modify those provisions. (e) Prior-year charges. An institution may use a student's title IV, HEA program funds to pay minor prior-year institutional charges if-(1) The student has, or will have, a title IV, HEA credit balance as determined under paragraph (b)(2) of this section; (2) The institution obtains the student's authorization to pay these charges; and (3) The prior-year charges do not exceed $100; or (4) The payment of these charges does not, or will not, prevent the student from paying his or her current-year education costs. (Authority: 20 U.S.C. 1094) Note: (a)(4) added; (a)(1), (b)(1), (b)(2) introductory text, (b)(2)(i)(C), (b)(4)(i) introductory text, (c)(2), (d)(1)(i) and (d)(1)(iii) amended June 30, 1995, effective July 31, 1995. (b)(1) amended and (e) added December 1, 1995, effective July 1, 1996.