Many schools believe that using a third party financial aid servicer protects them from compliance problems. The surprising truth is that often the likelihood of compliance problems actually increases when schools engage a third party processor. At the most recent FSA conference in Atlanta, ED was very clear that they do not endorse or approve third party servicers, and only recently began auditing them in program reviews.
The U.S. Department of Education has found as part of their third party servicers program reviews that many servicers share the same kinds of findings and violations and institutions that contract with third parties to perform some aspect of administering aid to students, are severally liable for any issues resulting from their servicers improper practices and shortfalls.
ED put together a top 16 list of findings common among third party servicers citing too many problems that put schools at risk.
If you use a third party servicer now or are considering using one, be sure to ask them for a copy of their most recent program review report before you get locked into a contract that may be difficult to break.
- Inadequate Contract / Written Policies and Procedures
- Inadequate Record Keeping
- Failure to Maintain Adequate Audit Trail
- Failure to Perform Proper Reconciliation
- Satisfactory Academic Progress Deficiencies
- Failure to Resolve Conflicting Information
- Verification Violations
- Student Credit Balance Deficiencies
- Return of Title IV Deficiencies
- Leave of Absence Deficiencies
- COD – Inaccurate/Untimely Reporting
- NSLDS – Inaccurate/Untimely Reporting
- Entrance/Exit Counseling Deficiencies
- Inadequate Notices and Authorizations (Required Disclosures)
- Failure to Report Third-Party Servicer
- Standards of Administrative Capability
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