In January 2015, the U.S. Department of Education published Dear Colleague Letter GEN 15-01 which provided guidance for institutions which contract with “Third-Party Servicers” to provide outsourced services such as Default Management and Financial Aid Disbursement processing. At the time, the Department was concerned that a number of third party servicers were telling institutions that they were not in fact a third party servicer so as to avoid oversight and audit requirements. Recently, the Department published a FAQ which provides much needed clarity in defining what exactly a third-party servicer is and examples of the type of functions and services they perform.

A third-party servicer is an entity or individual that administers any aspect of an institution’s participation in the Title IV programs, including, but not limited to, services and functions necessary:

  • For the institution to remain eligible to participate in the Title IV programs,
  • To determine a student’s eligibility for Title IV funds,
  • To account for Title IV funds,
  • To deliver Title IV funds to students, or
  • To perform any other aspect of the administration of the Title IV programs.

If your institution uses a consultant to do any of the following, you should review the Q & A to determine if it is necessary to report your contracted relationship to ED:

  • Processing FAFSA Applications, Providing Financial Aid Counseling
  • Determining Student Eligibility; Verification, SAP Evaluation, Calculating Awards, Packaging, R2T4, Reconciliation
  • Processing, Certifying, Originating FSA Awards, Including Advanced or Reimbursement Funding Preparation
  • Preparing or submitting E-App, FISAP, IPEDS or Enrollment Reporting to NSLDS
  • Preparing consumer information disclosures, Security Reports, Biennial review of drug & alcohol abuse prevention programs, graduation and transfer rates, job placement rates, gainful employment disclosures, entrance / exit loan counseling, preferred lender lists
  • Default prevention, default aversion
  • Cash Management
  • Perkins loan servicing or collection.


For more details you can read the full Q&A here: http://bit.ly/2bskhLM