Prorating Institutional Charges

The U.S. Department of Education’s Office of Postsecondary Education (OPE) recently released a lengthy electronic announcement about the regulations found at 34 CFR 668.164(c) which require institutions to credit a student’s account with Title IV funds to pay for allowable charges associated with a payment period.  These regulations were part of the cash management final regulations that went into effect on July 1, 2016 which required institutions to prorate costs for books and equipment if an institution charges a student for some or all of the student’s books and supplies at the beginning of the student’s enrollment and the student does not have a real and reasonable opportunity to obtain those materials elsewhere, when determining the amount of Title IV aid to provide to the student as a credit balance during each payment period.

If an institution routinely debits students’ ledger accounts for the amount of the charge for books, supplies, and equipment along with tuition and fees, it is an institutional charge. FSA considers all institutional charges to be part of a student’s tuition and fees for the purposes of implementing the regulations found in 34 CFR 668.164(c)(1)(i) relating to the crediting of a student’s account. The regulations provide a specific formula for prorating charges if an institution assesses charges for more than a payment period at a time. For programs with substantially equal payment periods where the institution charges up-front for the whole program, total institutional charges, including any books, supplies or equipment charges, must be divided by the number of payment periods in the program. For other programs, the institution must divide the number of credit or clock hours in the payment period by the number of hours in the program and multiply the result by the total institutional charges for the program.

Regardless of whether the institution charges for other types of tuition and fees by the payment period, the cost of books, supplies, and equipment (including kits) must be prorated when determining the amount of Title IV aid to credit for a given payment period if students do not have a real and reasonable opportunity to purchase the books, supplies, and equipment elsewhere and those items are intended for use over a greater timeframe than a payment period. In cases where an institution charges tuition and fees by payment period, but is required to prorate the cost of books, supplies, and equipment over more than one payment period, the institution should add the cost of the books and supplies prorated under the regulatory formula to the tuition and fees it charges for the payment period when determining the amount of Title IV aid to credit to the student’s account for that payment period and the amount to provide to the student as a credit balance.