Compliance Archives

Guidance on 1098-T and Pandemic Relief (HEERF) Funds

December 21, 2022

By: Christy Blakney, Student Business Services (SBS) Consultant

First, The Good News

Collecting and reporting correct information on IRS Form 1098-T seems to continually cause challenges. The good news is that there are no substantive changes to reporting for the 2022 tax year and past year challenges for properly reporting pandemic relief (HEERF) funds have been firmly answered. The Internal Revenue Service previously clarified that the emergency relief funds paid directly to students, or for which the student directed to be applied to their account balance, should be treated the same as any personal payment.

Treatment of Various Fund Types

Note that the IRS guidance only applies to funds under Section 3504 (additional Federal Supplemental Educational Opportunity Grant funds), Section 18004 (HEERF), Section 18008 (Howard University, Gallaudet University), Section 314 of the COVID Relief Act, and Section 2003 of the American Rescue Plan (ARP). It may not apply to funds that came through the states under the Governor’s Emergency Education Relief (GEER) Fund under Section 18002(c)(2) of the CARES Act. Institutions that received those funds from their states could use them to fund institutional grants to students. Absent guidance to the contrary, those grants to students should likely be reported on the 1098-T in the same manner as other institutional aid, especially for state tax reporting purposes. Additionally, funds received by the institution and used to “write off” delinquent student account balances may need to be reported to the student on a 1099-C as a cancellation of debt. Be sure to consult your tax office for applicability.

Inform Your Students

While school officials want to be very clear that we will never provide tax advice, you should provide information that lets them know how each amount reported on the 1098-T was calculated. The IRS allows institutions a wide range of flexibility in reporting to allow for differences in policy and timing but that is exactly what makes a 1098-T confusing to some taxpayers. Many taxpayers expect the form to report “plug and play” amounts similar to a W-2 or 1099 but unfortunately, that is simply not true. Providing a detailed supplement of the calculations is not always feasible so it is important to clearly state your school’s policies with regard to items such as treatment of deposits, exemptions, waivers, contracts, and also the school’s choice of reporting spring charges (Box 7 option). These helpful tips can be reported on your own 1098-T FAQ site or as a communication that accompanies your 1098-T form.

At a minimum, sharing the link to the IRS FAQs may help reduce questions directed to your office and will support your calculation method for reporting amounts on the 1098-T.

Remember to Solicit Students’ TINs

And, finally, make sure you continue to follow IRS guidance to send a written solicitation (e-mail and other electronic communications are considered “written”) to any student who has not provided their taxpayer identification number (TIN), e.g., Social Security number. Best practices suggest sending this solicitation at least twice before sending your file to the IRS. Rules require schools to file 1098-Ts even if the student fails to provide his/her TIN. Proof of an annual request protects the institution from being assessed penalties for filing a 1098-T without a TIN. Also, consider working with your Registrar’s Office to coordinate this information-gathering function. Also, be sure you “check the box” on the IRS copy of your 1098-T file indicating you have complied with this solicitation requirement during 2022.

If a student fails to provide you with their TIN prior to the institution submitting their 1098-T file to the IRS, the IRS indicates that you should not issue a corrected form simply to add or correct personal information. Corrected forms are only necessary if reported amounts were calculated incorrectly and are being changed.

Still Have Questions

Student Business Services can help your institution review its existing business practices related to 1098-T and other reporting requirements. Together, we can develop a comprehensive managerial reporting plan that is easy to execute and ensures you will meet regulatory deadlines. Contact us today for a no-obligation consultation.

A FAS-Track to New Academic Year Setup

December 8, 2022

By: Lisa Seals, Senior Consultant

Ready for the New Academic Year?

Getting ready for a new academic year can be a time of reflection or pulling your hair out. It’s a time to determine what has worked well, what could be improved, and what must totally be re-evaluated or reinvented.

Where to Start?

All Student Services, or Enrollment Management, departments are crucial to the new academic year setup. Using the right information from each area in the setup process not only streamlines operations but also maintains compliance measures and ultimately gives students a better experience. Each department has specific requests and requirements of the Financial Aid Office. Mapping out everything that is needed, why it is needed, and the timelines to be met is a great starting point.

What’s Needed and From Whom?

Gathering data, from certain departments, helps to set reasonable timelines to get these steps set up in your ERP systems and to produce actual or estimated offers to all students, but specifically the first-time, first-year incoming students.

Admissions

Admissions Requirements
Admissions application acceptance
Admissions approval timelines/codes
Merit scholarship model and award amounts
Need based grant (scholarship) model for incoming students
When are students given school email and portal access?

Registrar

Academic calendar (Start/End dates)
Official break of 5 or more days
Term and Module census dates
Is the calendar approved and are all dates in the registrar module?

Business Office

Tuition and Fee rates
Billing statement dates
Will estimated aid be listed on the bill?

Housing

Will actual housing costs be available or will estimates be used?

Information Technology

When will the new academic year release of the software be installed?
Will there be an opportunity for testing the new release in a development (i.e., sandbox) environment?

What would you ask for?

Reasonable Timelines?

What is a reasonable timeline? Meeting with the various student services departments will be helpful during this process. Generally, the Admissions Office and Senior Leadership have a target date for first-year, incoming students to receive offers from the institution. With that in mind, make sure that you have the new academic calendar as well as updated tuition and fee rates, and housing costs. Also, confirm the IT Department’s timeframe for importing the new award year’s data into your ERP system.

We know that we can use estimated data for this information. Most institutions want to now use actual tuition and fee rates while establishing a cost of attendance. The goal is to have finalized information to complete the setup processes, and not have to redo anything. What do you use?

What’s Next?

Let’s set up the system! We’ll get into that soon!

Administrative Capability, a Mammoth Challenge in Financial Aid’s Staffing Crisis

November 17, 2022

By: Bob Covey-Robbins, Consultant

What does it mean for an institution of higher education to be administratively capable? Why is it important? Whose job is it to ensure that a school complies with administrative capability requirements?

Administrative capability is carefully evaluated when a school’s application for certification or re-certification is reviewed by the Department of Education. The school must demonstrate administrative capability. 34CFR§668.16 extensively outlines the conditions for administrative capability. In short, it means that the institution has the people, expertise, systems, technology, policies, and procedures to effectively manage Federal Student Aid programs.

The institution must designate someone to be responsible for administering FSA programs, but it also must ensure that the person is supported by an adequate number of staff needed to effectively administer the programs. There is no specific formula for determining the number of staff needed. It must be determined by the number of students applying for financial aid, the various financial aid programs the school administers, the technology used, and how much administration is automated.

Many schools are currently struggling to maintain an adequate number of staff to remain in compliance with the daunting number of Title IV statutory and regulatory requirements. According to a US Chamber of Commerce article, today, there are 2.9 million fewer people in the workforce than there were in February 2020, and even if every unemployed person were to gain employment, there would still be a labor shortage (Ferguson, 2022).

Has the financial aid office workload lessened with declining enrollment? Many would say that it has actually increased since the COVID-19 pandemic started. Expanding the modality of financial aid counseling to include remote advising, administering HEERF funds with its frequent changes in federal guidance and reporting requirements, and more recently, the addition of Fresh Start student loan default relief. The number of students seeking a Fresh Start at a school can bring a significant increase to the financial aid office workload.

Declining enrollment has led to decreases in operating budgets, making it even more difficult to retain valuable staff as more attractive employment opportunities arise outside of higher education administration. Creating entry-level financial aid office positions may add staff, but those staff need extensive training, supervision, and coaching as they become proficient in their new role. For many schools, the cost of new aid officer training programs offered by state, regional, and national associations is out of reach.

The harsh reality for many financial aid offices is that they are facing the perfect storm of increased demand for services, staffing vacancies, continuous audit pressures, shrinking budgets, and, ultimately, concern about maintaining the school’s eligibility to participate in federal student aid programs.

To provide the needed services to help families with financing higher education, while maintaining legislative and regulatory compliance, more schools are seeking interim staffing solutions. Services can range from filling a financial aid director’s role to outsourcing daily financial aid processing tasks. For many schools, using a trusted partner for interim staffing and outsourcing processing tasks provides a more cost-effective means to providing quality student service, while maintaining compliance and making a valuable contribution to the school’s enrollment management efforts.

CFPB Weighs In on Withholding Academic Transcripts

November 2, 2022

Withholding academic transcripts for outstanding student account or loan balances has been a primary debt collection tool for many years. Though recently under fire as harming many students (see our March 2022 Tip), this issue is drawing attention both from state regulators and legislators and, now, from the federal Consumer Financial Protection Bureau (CFPB). While 16 states have enacted laws or are proposing legislation to halt or reduce the campus practice, which is seen as inhibiting students’ academic careers or employment opportunities, the federal agency’s recent Supervisory Highlights report cites the “blanket” usage of the transcript sanction as unlawful.

The recent report came on the heels of an announcement earlier this year that the agency would examine operations of colleges that act as lenders. In this case, the CFPB has interpreted student accounts as a form of lending or credit offered to students by schools. While definitions may be subtle or subject to various interpretations, the CFPB report links transcript withholding to provisions under the Dodd-Frank Act, which prohibits unfair, deceptive or abusive acts and practices (UDAAP) because of potential financial injury to consumers.

Though the CFPB cannot enact laws, it has rulemaking and enforcement authority to deal with any consumer financial product or service. The agency also partners with other federal departments on many financial initiatives, and could work with the U.S. Department of Education to potentially promulgate new rules or guidelines.

Senior leadership at colleges and universities should have this issue on their radar from both a service delivery and compliance perspective. Presidents, chief financial officers, registrars and enrollment management leaders need to understand and weigh their existing policies and procedures on withholding academic transcripts and other services. A joint statement signed this month by 22 higher education associations urges college leaders to “have a clear understanding of institutional policies regarding transcript and enrollment holds, and be prepared to explain how they determined these policies to be effective and fair.”

In states where no restrictions currently exist, government relations staff should be monitoring legislative activities since constituent complaints have often led to proposed laws. In other cases, complaints to state attorneys general may trigger new rules or legislation.

Institutions also should engage their general counsel or an outside attorney to help interpret these laws and requirements and adjust their business practices and policies to become and/or remain in compliance. Bringing institutional resources together to review and update policies and procedures can have a positive outcome for students and finances with minimal impact on institutional resources. The National Association of College and University Business Officers (NACUBO) and the American Association of Collegiate Registrars and Admissions Officers (AACRAO) provided guidelines for schools to consider in an April 2022 statement.

Outsourcing Financial Aid: A Better Economic, Strategic, and Student-Centered Model

October 12, 2022

Processing financial aid records is one the most important yet complex steps for many financial aid offices. When not administered correctly or efficiently, it can create compliance risk or delays in students receiving their awards which has real enrollment and financial consequences. The recent staffing shortages throughout the industry have only magnified these challenges.

Many university presidents and CFO’s are exploring a new model – outsourcing their financial aid processing services. Those university leaders are discovering outsourcing is a better model for 4 reasons.

It is a better economic model. University leaders can better control their costs in an outsourced model rather than carrying high costs associated with large staffs with frequent turnover. In addition to the cost savings, an outsourced processing model creates greater ROI. When financial aid is administered sooner, students receive their awards earlier which creates a real recruiting and retention advantage. Even a 2% gain in admit yield or a 2% increase in retention equates to noticeable gains in headcount and significant gains in net tuition revenue. The cost savings combined with greater ROI is why university leaders are discovering the outsourced partnership is a better economic model.
It is a better strategic model. When the back office processing work is outsourced, financial aid staff are unconstrained to do what they do best – counsel students and parents. Key financial aid staff can focus on higher priority strategic initiatives that achieve operational, enrollment, and student experience goals. Those strategic priorities make a significant impact on the university.
Students are better served. When financial aid files are processed sooner, students receive their financial aid awards earlier increasing their propensity to enroll as new students or return as current students. Parents and family members are more engaged and satisfied in the process. Student experience is directly correlated to recruitment and retention. Most financial aid leaders entered the profession, in the first place, to help make college affordable and accessible and to serve students. This model supports that goal.
Peace of mind that the university is always in compliance. Besides the benefits of timely and accurate financial aid administration, university leaders who find a trusted strategic partner can rest assured their financial aid is administered in full compliance with the Department of Education.

Important factors to consider

As a best practice, have the outsourced processing work completed in your student information and financial aid management system. Select a partner that is experienced and proficient in your technology system.
Find a partner with deep industry experience and a long-standing track record of success with their clients and who is fortified by highly experienced consultants and team members. These are the strategic partners you want.
Ask potential partners about their audit history. Those companies are audited each year just like universities.
Ask potential partners about their quality control measures and processes. The best companies will quickly respond, providing the detailed quality control measures they have in place to ensure full compliance.
Inquire whether the outsourced partner will just replicate your current processes or will they listen and work with you to make your current processes more efficient. Will they merge their best practices with your client-specific needs? If so, that is a good partnership.

At FAS, these are a few of the tenets and best practices we built our model on.

Final thoughts

Financial aid processing is one of the most important steps in a financial aid operation. The current staffing struggles in most financial aid offices only makes this more challenging. Those staffing challenges show no signs of lessening anytime soon. But there is an alternative. It’s a better model too. From the initial application until the last dollar is disbursed, the right outsourced partner will make a significant impact on your financial, operational, and student experience goals.

Welcome to FAS’ Consulting Corner

September 30, 2022

Welcome to FAS’ Consulting Corner! In conjunction with launching our new website, we want to use this space to share relevant information with financial aid and student business services practitioners. It’s a safe and reliable place to get the latest news on what’s happening in financial aid and student finance all around the country. We’ll tackle issues from maintaining rigorous compliance standards and leveraging technology, to giving your students the best possible experience. Our consultants are thought leaders with a combined 1,600 years of experience in their respective fields. Higher Education is an industry that’s always in motion. There is always something new to talk about, so check back often. We’re adding fresh content all the time. Whether you’re considering services, need guidance or resources, or just want to connect with FAS, we’ve got something for you.

Perkins Loan Closeout – Assignment Extension

May 22, 2022

As part of the wind down of the Perkins Loan Program, the Department of Education (ED) requires institutions to assign to the Department all Perkins Loans that have been in default for more than two years. Unless the school has documentation that these borrowers are making payments toward their Perkins loan debt, you are required to assign all Perkins Loans in default for more than two years to the ED. The previous deadline of June 30, 2022, has been extended to June 30, 2023.

ED provides guidance on the Perkins loan assignment process in the Perkins Assignment and Liquidation Guide. ED will provide a school with the reason why any loan is rejected for assignment. If the school can resolve that issue(s), the loan can be resubmitted for assignment. In instances when an issue cannot be resolved and assignment is not possible, the school must purchase that loan.

Federal regulations state that ED may require a school to reimburse its Federal Perkins Loan Program Fund for the entire amount of the outstanding principal balance, plus any accrued interest on loans ED determines to be unenforceable.

ED reminded schools that although the Perkins Loan Program is winding down, they remain obligated to ensure all collection procedures, outlined in the regulations, are being followed.

Have Administrative Holds Become a Hot Button Issue?

March 30, 2022

Institutions of higher education have traditionally used sanctions such as preventing future class registrations and withholding academic transcripts when students owe delinquent account balances. Depending on the schools’ policies, or sometimes state law or regulations, such sanctions may be triggered for any amount due or at a higher dollar threshold that is formula-driven or set arbitrarily.

Short of referring these debts to an outside collection agency or other entity to recover outstanding balances, these holds have provided colleges and universities with a low-cost and easy-to-implement remedy to force students to pay in full or reach out for assistance.

However, recent coverage in the media (for instance, Hechinger Report and Inside Higher Ed) focusing on the large number of students whose financial problems have forced them to delay completion of their educations has raised attention to use of these types of sanctions. A 2020 study by Ithaka S+R on impacted students with “stranded credits” portrayed a scenario where financially-challenged students had little, if any, opportunity to receive their degrees. They could not continue their educations or transfer credits because of outstanding student debt which, in some cases, amounted to only a few dollars.

The issues raised by transcript withholding led the California legislature to enact a law in 2020 prohibiting all institutions from blocking transcript requests because of outstanding balances owed. Washington and Louisiana have since enacted comparable legislation and a number of other states are considering doing so. At the same time a bill was proposed recently in New York, both the State University of New York (SUNY) and City University of New York (CUNY) systems stopped sanctions using transcripts.

In addition to complaints from current and former students, schools now may be subject to complying with new laws and regulations governing their internal operations. So, what should colleges and universities be doing today to mitigate the impact?

Some ideas to consider include:

Review existing policies and procedures governing use of holds and restricting student services. Are you restricting transcripts or registration for any amount or reason (i.e., tuition vs. parking or library fines) that money is owed? Consider your current dollar threshold for service restrictions and determine how, or if, it has been reviewed or changed in recent years (besides pandemic management).
Involve your institution’s attorney in the review process. Having counsel look at or help create an appeal process that is consistently managed can ensure a transparent and fair practice. Creating differing rules or interpretations for every student situation not only can lead to criticism, but could create the perception of a UDAAP, which refers to unfair, deceptive, or abusive acts or practices by those offering financial services (including higher education), which is illegal under the Dodd-Frank Act of 2010.
Weigh whether your state or district has implemented or is considering legislation or new rules. Work with your government affairs office or lobbyist to take the temperature on how institutional restrictions are viewed by legislators and regulators. Educate officials on what the impact of eliminating holds might be on the institution.
Investigate opportunities to create and use debt reduction or forgiveness programs. Resolving small balance debts can be a “win-win,” eliminating minor amounts owed, while creating a positive experience for a student whose continued attendance results in additional revenues earned. Student success stories not only can breed positive press for an institution, but may even result in additional enrollments and donations.

At a time when colleges and universities are questioned as to whether they are sufficiently accessible or affordable, using service restrictions that block students from continuing or using their educations will remain under close scrutiny. How a school deals with this issue will not only impact collections but could also influence future revenue streams and enrollments.

Safeguarding Students’ Information Now Requires Stricter Oversight

February 26, 2022

The Federal Trade Commission (FTC) issued a final rule on December 9, 2021, amending the customer information safeguard requirements under the federal Gramm-Leach-Bliley Act (GLBA), also known as the “Safeguards Rule.” Since 1999, the GLBA has set the standards for maintaining customer data for financial institutions, including colleges and universities that participate in the Title IV federal student aid programs.

While the revised Safeguards Rule took effect on January 10, 2022, schools will have until December 2022 to implement most of the required changes in the rule. Some of the notable mandates include:

Concentrating program oversight under a single qualified individual rather than shared by a team or group of employees. While this oversight likely will be centered under an institution’s information technology department, look for the school’s chief information security officer (CISO) or chief information officer (CIO) to be the responsible party.
Ensuring that information security programs are based on a written risk assessment that looks at “foreseeable internal and external risks to the security, confidentiality, and integrity” of any consumer (student) information held by the institution. Written documentation is now a mandatory requirement under the Rule.
Designing information security programs to control assessed risks that include eight specific types of safeguards:
Monitoring and testing of internal controls and procedures regularly to protect against actual and attempted hacks of information systems.
Overseeing and assessing service providers when contracting for outside services. This will include actual periodic assessments of vendor systems by the institution.
Reporting annually to the institution’s board about its information security program and compliance with the updated Safeguards Rule.

Because higher education institutions are frequent targets of hackers and victims of data breaches, a strong and well-understood infrastructure and program to maintain and protect student information is critical. These programs require institution-wide accountability. It is vital that all employees be aware of changes and take responsibility to protect personal data.

R2T4 Rule Changes Now in Effect

November 10, 2021

R2T4 Rule Changes Now in Effect

A little more than a year ago, the Department of Education (ED) put out revised rules addressing several thorny Title IV compliance areas, including a perennial favorite: return to Title IV funds (known as R2T4). A team of negotiators had spent months in 2019 trying to improve the rules on student withdrawals, particularly as they apply to programs taught in modules. The final rules were published under the title of “Distance Education and Innovation” on September 2, 2020, and officially took effect on July 1 of this year, although schools were allowed to implement the changes sooner at their discretion.

ED has recently provided additional guidance on the new rules, primarily through updating a set of Q&As. While most of the revisions were made in August 2021, note that a few answers were revised in early September and then again in October. An April webinar focusing on changes to satisfactory academic progress and R2T4 is also useful in laying out the changes.

The revised rules change several existing definitions and introduce some new concepts:

Program Offered in Modules. Subscription-based programs and nonterm programs are now excluded from the definition. If any course offered during a term does not span the entire length of the payment period or period of enrollment, the program is offered in modules. At some institutions, while the fall and spring terms only include standard length courses, two shorter summer sessions may be combined into a single term and thus meet the definition of a program offered in modules.

Withdrawal Exemptions. A student is not considered to have withdrawn if:

In any program (not just a program offered in modules), the student has completed all the requirements for graduation before completing the days or hours in the period
In a program offered in modules
- The student successfully completes one module that includes 49 percent or more of the number of days in the payment period
- The student successfully completes a combination of modules that include 49 percent or more of the number of days in the payment period
- The student successfully completes coursework equal to or greater than required to meet the institution’s definition of a half-time student for the payment period

This is the first time the R2T4 rules consider a student’s success in the course as a determining factor. Generally, under the R2T4 rules, an earned “F” is treated the same as any other completed course.

For the purposes of the withdrawal exemptions, the number of days in the payment period is calculated by excluding scheduled breaks of five or more consecutive days and all days between modules. It will be the same for all students who enroll in the term. This is not the same as the denominator used in R2T4 calculations.

R2T4 Freeze Date Option. Institutions now have two options for determining the denominator used in the R2T4 calculation to figure out how much aid has been earned when a student withdraws from a program offered in modules:

Using an “R2T4 freeze date” as a fixed point in time to determine the number of days the student was scheduled to attend during the payment period. The R2T4 freeze date is different from a Pell recalculation date and is used for different purposes even though the school may determine they are the same date. The freeze date must not occur prior to the time that most students enroll for classes for the period. OR
Monitoring changes in the student’s enrollment throughout the period.

Scheduled days should count if they were used to determine the student’s eligibility for Title IV funds for the payment period. This is not a student-by-student decision; the school must use the same policy for all students.

Much more detailed guidance on the ins and outs of the revised R2T4 rules are discussed in ED’s Q&As. Schools are encouraged to study them closely.

Tag Archive for: Compliance