Along with wide-ranging overhauls and easy-to-implement changes to regulations surrounding Title IV programs, the Department of Education (ED) annually makes more subtle changes or additions that can pass under the radar. Big or small, any alteration to the Federal Student Aid Handbook matters.
To that end, recently while we were identifying a finding for a client, a clarification that was newly added to the 2020-21 Handbook came into play. Related to inadvertent overpayments, the clarification deserves attention from financial aid administrators.
In the finding, a student’s unsubsidized Direct Loan disbursed after their last date of attendance (LDA), but the school treated it as aid disbursed, rather than aid that could have been disbursed, which contradicts the “Treatment of inadvertent overpayments” section in Volume 5, Chapter 2 of the Handbook.
In this scenario, the student earned 100% of the unsubsidized loan, but we pointed out that the overpayment should have been offered as a post-withdrawal disbursement (PWD), as it technically was aid that could have been disbursed. However, while normally a school would have to attempt to have the student authorize a PWD of Direct Loan funds, we discovered new language in the 2020-21 Handbook which states, “an institution is not required to obtain the student’s permission (post-withdrawal disbursement confirmation) to retain the amount of inadvertently overpaid Direct Loan funds that the R2T4 calculation indicates that the student has earned and that could have been disbursed as post-withdrawal disbursement.”