Schools must complete final reconciliation of their 2015-2016 Direct Loan program by the closeout deadline of July 31, 2017.
Schools are required by regulatory requirements to reconcile every month. Doing so simply helps schools meet all of the cash management and disbursement reporting requirements. Reconciliation is a team effort between the Business Office and the Financial Aid Office which both have information that is needed to reconcile. The purpose of reconciliation is to make sure that internal and external accounts are consistent and agree with one another. Some schools reconcile more frequently and as a result, those schools are able to identify issues sooner and resolve them before they become more systemic problems.
In preparation for the 2015-2016 Direct Loan Closeout, schools should make sure that all of the following information is verified during the reconciliation process.
Disbursement Dates – The Disbursement Date is the date that a school credits a student’s account at the school or pays a student directly with Title IV funds. This is the date that a school must report to COD as the actual disbursement date. Be careful that you are not reporting the anticipated date. The anticipated disbursement date is the date that a school expects to disburse Direct Loan funds. The actual disbursement date is the date the funds are made available to the borrower. In many cases, the anticipated disbursement date that a school initially reports to the COD System may not be the same as the actual disbursement date.
Loan Periods and Academic Years – The 150% Direct Subsidized Loan Limit rules require schools to report Direct Loan Periods and Academic Year information to COD. What some schools forget is that there are a number of scenarios in which a student’s reported loan period and/or academic year must be updated. For example:
- The borrower requests that a loan, or a disbursement of a loan, be cancelled;
- The borrower does not begin attendance, or does not begin attendance on at least a half-time basis, in a payment period that was included in the originally reported loan period and the school did not make any disbursements of the loan for that payment period;
- The school determines that the borrower is not eligible to receive a Direct Loan for a payment period that was part of the originally reported loan period. Reasons why the a borrower may have lost eligibility for the loan include: the borrower’s failure to meet the school’s satisfactory academic progress (SAP) standards, the borrower has a grant overpayment, or a change in financial circumstances that makes the borrower ineligible for a Direct Subsidized Loan;
- The borrower withdraws during a payment period that was included in the originally reported loan period and, as a result, the entire amount of the loan that was intended for that payment period is returned under the Return to Title IV aid calculation (R2T4); or
- For clock-hour programs, non-term credit hour programs, and certain types of non-standard term credit-hour programs, the borrower fails to progress to the next payment period or academic year as scheduled.
Stale Dated and Uncashed Checks – When students’ credit balances are disbursed to them by check, your school needs to track those checks to ensure that any unclaimed credit balances are returned to the Department. As part of your regular reconciliation process, return unclaimed funds to ED and process the corresponding downward adjustments to disbursements. Read our blog post on preventing fraud here:
According to ED, schools should be able to reach a zero Ending Cash Balance within a month of making their final disbursements if they are meeting all of the cash management, disbursement reporting, and monthly reconciliation requirements.
To be considered successfully closed out, the school must:
- Reconcile to an Ending Cash Balance of $0 and Total Net Unbooked Disbursements of $0, as reflected on your monthly School Account Statement Report and in your school’s internal records; and
- Complete the Balance Confirmation form on the COD Web Site.
The Balance Confirmation form can be completed after the school has reconciled to a $0 balance and has received a Zero Balance Letter, which is sent to the school via email. Once the letter is received, the school should log in to the COD Web Site. Click on the Balance Confirmation link from the School options menu on the left-hand side of the page, and follow the instructions on the Balance Confirmation screen.