Contents – Part 1

CHAPTER 1 – STANDARDS OF SCHOOL ELIGIBILITY .......................... 1
The Three Definitions of Eligible Institutions .......................................................................... 1
Institutional Control .................................................................................................................. 1
Eligible Institution .................................................................................................................... 2
Admissions Standards............................................................................................................... 3
Additional Institutional Eligibility Factors ............................................................................... 5

CHAPTER 2 – THE PROGRAM PARTICIPATION AGREEMENT ................. 9
CHAPTER 3 – GENERAL PARTICIPATION REQUIREMENTS ..................... 9
Civil Rights And Privacy Requirements ................................................................................. 15
Contracts with Third-Party Servicers ..................................................................................... 15
Excluded activities ........................................................................................................................ 16
Employees of a school .................................................................................................................. 16
Requirements for contracting with a third-party servicer ............................................................. 16
Institutional liability ..................................................................................................................... 17
Notifying the Department of contracts ......................................................................................... 17

Incentive Compensation ......................................................................................................... 18
Adjustments to employee compensation ...................................................................................... 19
Enrollments in programs that are not eligible for FSA program assistance ................................. 19
Contracts with employers ............................................................................................................. 19
Profit-sharing or bonus payments ................................................................................................. 20
Compensation based upon program completion .......................................................................... 20
Pre-enrollment activities ............................................................................................................... 21
Managerial and supervisory employees ...................................................................................... 21
Token gifts .................................................................................................................................... 21
Profit distributions ........................................................................................................................ 21
Internet-based activities ................................................................................................................ 22
Payments to third parties for non-recruitment activities .............................................................. 22
Payments to third parties for recruitment activities ...................................................................... 22

Prohibited Activities in the Loan programs ............................................................................ 23
Anti-Drug Abuse Requirements ............................................................................................. 23
Anti-Lobbying Certification and Disclosure .......................................................................... 26

CHAPTER 4 – PROGRAM ELIGIBILITY.................................................... 27
Program Eligibility Requirements .......................................................................................... 27
Additional Eligibility Requirements ....................................................................................... 30

CHAPTER 5 – CONSUMER INFORMATION ........................................... 34
Basic Consumer Information Requirements........................................................................... 34
Financial aid information.............................................................................................................. 34
General information about the school .......................................................................................... 35

Consumer Information From The Department ....................................................................... 36
Student Right-to-Know Disclosures ....................................................................................... 36
Determining the cohort for completion or graduation and transfer-out rates ............................... 38
Definitions .................................................................................................................................... 39
Waivers ......................................................................................................................................... 40
Disclosing and reporting information on completion or graduation rates for the
general student body cohort ..................................................................................................... 40
Reporting information on completion or graduation rates for student athletes ............................ 44

Equity in Athletics .................................................................................................................. 46
Disclosure of the report ................................................................................................................ 46
Contents of the Equity in Athletics/EADA Report ....................................................................... 47
Definitions .................................................................................................................................... 49

Loan Counseling ..................................................................................................................... 50
Entrance counseling ...................................................................................................................... 51
Exit counseling ............................................................................................................................. 55

Drug and Alcohol Abuse Prevention Information .................................................................. 59
Misrepresentation ................................................................................................................... 60
Definition of misrepresentation .................................................................................................... 60
Nature of educational program ..................................................................................................... 61
Nature of financial charges ........................................................................................................... 62
Employability of graduates ........................................................................................................... 62

Campus Security ..................................................................................................................... 63
General information ...................................................................................................................... 63
Distribution of the Campus Crime Report .................................................................................... 63
Definition of campus .................................................................................................................... 64
Timely warning ............................................................................................................................. 65
Campus security authority ............................................................................................................ 66
Professional and pastoral counselors excluded from reporting requirements ....................... 66
Daily crime log ............................................................................................................................. 67
The annual security report ............................................................................................................ 68
Policies and procedures for reporting crimes ........................................................................ 68

Campus Security and The Family Educational Rights and Privacy Act (FERPA) ................. 73

CHAPTER 6 – WRITTEN AGREEMENTS BETWEEN SCHOOLS........... 79
Definitions .............................................................................................................................. 79
Consortium Agreement ........................................................................................................... 80
Contractual Agreement ........................................................................................................... 81
Study Abroad or Domestic Exchange Programs .................................................................... 82
Students in approved study abroad programs are entitled to FSA ............................................... 83

CHAPTER 7 – RECORDKEEPING AND DISCLOSURE ........................... 85
Required Records ................................................................................................................... 85
Program records ............................................................................................................................ 86
Fiscal records ................................................................................................................................ 86
Loan Program Records ................................................................................................................. 87
Records of the schools administration of the FSA programs ....................................................... 88

Record Retention Periods ....................................................................................................... 90
Record Maintenance ............................................................................................................... 91
Acceptable formats ....................................................................................................................... 91
Special requirements for SARs and ISIRs .................................................................................... 92

the Gramm-Leach-Bliley (GLB) Act ...................................................................................... 93
Examination of Records ......................................................................................................... 95
Reasonable Access To Personnel ............................................................................................ 96
FSA Recipient Information ..................................................................................................... 96
Disclosing Student Information .............................................................................................. 96
The Family Educational Rights and Privacy Act (FERPA) .......................................................... 96
What constitutes written consent ............................................................................................ 98
Additional Privacy Requirements ........................................................................................... 98
Education Records and their release ...................................................................................... 99

Disclosure of requests for information ...................................................................... 101
Sample disclosure statement ....................................................................................................... 102
Redisclosure to other authorized parties ..................................................................................... 102
Ex Parte Orders ........................................................................................................................... 103
Lawfully issued subpoenas and court orders .............................................................................. 103
Health or safety emergency ........................................................................................................ 104

CHAPTER 8 – PROGRAM INTEGRITY
The Department’s Role ......................................................................................................... 105
FSA Audit Requirements For Schools .................................................................................. 105
Simultaneous FSA audit submissions ......................................................................................... 106
Waivers of the FSA audit requirement ....................................................................................... 107
Submission dates for FSA audits ................................................................................................ 109
FSA Compliance audit submission requirements ....................................................................... 110
FSA Audited financial statement requirements .......................................................................... 111
FSA Consolidated statements ..................................................................................................... 111
Required disclosure of 90/10 revenue test .................................................................................. 112
A-133 audit guidelines................................................................................................................ 112
Audits for third-party servicers................................................................................................... 113
Having the audit performed ........................................................................................................ 114
eZ-Audit .................................................................................................................................... 114
The eZ-Audit process ............................................................................................................ 115
Review of FSA audit submissions ......................................................................................... 115

Access To Records ................................................................................................................ 116

Program Reviews .................................................................................................................. 116
Unannounced Program Reviews ................................................................................................ 116
Written report.............................................................................................................................. 118

Appealing Audit and Program Review Determinations ....................................................... 118
Reviews conducted by Guaranty Agencies ......................................................................... 119
Case Management................................................................................................................. 120
Possible actions .......................................................................................................................... 120

Corrective Actions and Sanctions ......................................................................................... 121
Sanctions ..................................................................................................................................... 121
Actions due to program violations or misrepresentation ............................................................ 122
Emergency action ....................................................................................................................... 122
Fine ............................................................................................................................................. 123
Limitation ................................................................................................................................... 123
Suspension .................................................................................................................................. 123
Corrective action......................................................................................................................... 123
Termination ................................................................................................................................. 123
Possibility of reinstatement................................................................................................... 124
Criminal penalties ....................................................................................................................... 124

Requirements When a School Ceases to be an Eligible Institution ...................................... 125
Loss of accreditation ................................................................................................................... 125

Requirements When a School’s FSA Participation Ends ..................................................... 126
Voluntary Withdrawal from FSA Participation .................................................................... 126
Involuntary Withdrawal from FSA Participation.................................................................. 127
When participation ends ............................................................................................................. 127
Additional closeout procedures .................................................................................................. 128

Loss Of Eligibility Or Withdrawal From Loan Programs .................................................... 129

CHAPTER 9 – FISCAL STANDARDS ........................................................ 131
Refund Reserve Standards .................................................................................................... 132
Returning funds in a timely manner ........................................................................................... 132
Compliance thresholds ............................................................................................................... 133
Letter of credit ............................................................................................................................ 134
Exceptions to the letter of credit requirement ....................................................................... 135
Tuition recovery funds ................................................................................................................ 135

Current In Debt Payments .................................................................................................... 135
Past Performance And Affiliation Standards ........................................................................ 136
Past performance of a school ...................................................................................................... 136
Past performance of persons affiliated with a school ................................................................. 137

CHAPTER 10 – ADMINISTRATIVE STANDARDS
Required Electronic Processes.............................................................................................. 139
Summary of required processes .................................................................................................. 139
Information for Financial Aid Professionals (IFAP) .................................................................. 140

Administrative Requirements for the Financial Aid Office .................................................. 141
Coordinating official ................................................................................................................... 141
Consistency of information ........................................................................................................ 142
Exchanging information on borrowers ....................................................................................... 144
Providing borrower information at separation............................................................................ 145
Information about delinquency and default ............................................................................... 145
Counseling .................................................................................................................................. 146
Adequate staffing ........................................................................................................................ 146
System of checks and balances ................................................................................................... 146
OIG Referrals ............................................................................................................................. 147

Cohort Default Rates ........................................................................................................... 148
Effect of default rates ................................................................................................................. 148
Default management plan ........................................................................................................... 149

Withdrawal Rates.................................................................................................................. 149
Debarment And Suspension Certification ............................................................................ 150
Debarment of school or its principals ......................................................................................... 150
Certifying current or prospective employees or contractors ...................................................... 151
Lower-tier covered transactions ................................................................................................. 152

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