The Definitive Guide to Title IV Student Financial Aid

Financial aid plays a critical role in making college an affordable option for many families, often rendering it an enrollment lifeline, particularly for smaller, tuition-driven institutions. Federal student financial assistance programs are administered by the U.S. Department of Education under Title IV of the Higher Education Act of 1965 as amended. So, whether you’re just starting the process of gaining eligibility for funding or looking to better coordinate financial aid management and reporting, understanding Title IV is a necessary starting point.

Overview of Title IV Funding

Every year, 15 million students receive $150 billion in federal student aid through the U.S Department of Education to help cover the cost of college–including hard costs like tuition and fees and room and board as well as variable costs like supplies, computers, books and transportation. These funds are distributed in a variety of forms including grants, loans and work-study programs, and are only available to eligible students enrolled in eligible programs at eligible institutions, of which there are thousands in the U.S.

Types and Disbursement of Federal Student Aid

For students, the financial aid process begins with the Free Application for Federal Student Aid (FAFSA). The information reported on a student’s FAFSA determines their financial aid eligibility for Title IV programs, namely grants, loans and work-study. A financial aid award letter prepared and sent by your school notifies students as to what forms of federal aid, and in what amounts, they will receive. Their full financial package might also include additional separate aid through school-administered scholarships and grants based on academic performance and other requirements.

Grants

  • Federal Pell Grant: Amounts change yearly, but the maximum award for the 2016-17 academic year is $5,815. An individual student’s award is determined by the government based on financial need, school cost and attendance plans. The Federal Pell Grant does not need to be repaid by the student.
  • Federal Supplemental Educational Opportunity Grant (SEOG): Specifically for students with exceptional financial need, the SEOG awards range from $100 to $4,000 per year. The U.S. Department of Education provides a certain amount of SEOG funds to each participating school, which can offer awards based on other aid received and availability of funds. The SEOG does not need to be repaid by the student.
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant: If your school participates in the TEACH Grant Program, students can be awarded up to $4,000 not based on need, but rather on their commitment to a career in teaching. Students must sign a TEACH Grant Agreement to Serve; if they do not fulfill the obligation, the grant is converted into a Direct Unsubsidized Loan as described below.
  • Iraq and Afghanistan Service Grant: The U.S. Department of Education provides funds to help pay for the educational expenses of students who lost a parent or guardian in military service in Iraq or Afghanistan, based on specific requirements.

Loans

Federal student loans are distributed in two categories: Direct Loans, for which the U.S. Department of Education is the lender; and Perkins Loans, for which participating schools are the lender.

  • Direct Subsidized Loan (Stafford): The U.S. Department of Education pays interest while the student is in school and during deferment and grace periods. Subsidized loans are determined by the school and cannot exceed a student’s financial need. (Loan limit: $5,500-$12,500/year)
  • Direct Unsubsidized Loan (Stafford): Unsubsidized loans are not need-based and are determined by the school based on cost of attendance and other financial aid received. Students pay or accrue interest as soon as the loan is given. (Loan limit: $5,500-$12,500/year for undergraduate; up to $20,500 for graduate)
  • Direct PLUS Loans: Given to graduate or professional students or to parents of undergraduates enrolled at participating schools.
  • Direct Consolidation Loans: Students can combine multiple federal student loans into one with a single loan servicer and monthly payment.
  • Federal Perkins Loan: School-based, low-interest loans for students with exceptional financial need. (Loan limit: up to $5,500/year for undergraduate; $8,000/year for graduate)

Federal Work-Study

Administered by participating schools, federal work-study allows students to work part-time, on- or off-campus, earning at least minimum wage to help pay for college as they go.

Basic Title IV Eligibility Requirements

Institutions of higher education, proprietary institutions of higher education, and postsecondary vocational institutes can seek eligibility if they meet a series of requirements, including offering associate degrees or higher, programs acceptable toward a bachelor’s degree, or programs that prepare students for gainful employment in a recognized occupation.

Schools must demonstrate adequate administrative capacity complete with internal checks and balances, financial aid counseling, and periodic reconciliation of fiscal and financial aid offices. They must also prove financial responsibility, which is in part determined by a composite score of 1.5 or higher and sufficient cash reserves. See all requirements for eligibility >

Accreditation and Title IV

Because accreditation ensures that institutions of higher education remain accountable to a certain level of quality in terms of instruction and training, the U.S. Department of Education considers it when determining a school’s Title IV eligibility. A total of 37 regional and national accrediting agencies are currently recognized for Title IV purposes. Make sure your agency is on the list >

Managing Student Financial Aid

Meeting the eligibility requirements for ample staffing and electronic systems necessary to process and administer Title IV funds doesn’t ensure that the back-end mechanics will be easy. Once a school earns eligibility and begins participating in student financial assistance programs, the challenge of tracking and reporting data mounts.

In addition to the initial disbursement of funds, schools must also grapple with situations of over-awarding (due to a change in students’ financial situation) as well as the return of Title IV funds if a student withdraws from their planned course of study at a certain point in time. Schools must also monitor Satisfactory Academic Progress (SAP), and take the necessary action toward financial aid probation, and in some cases eventually financial aid suspension, for students who fail to meet the requirements.

Properly managing funds based on federal regulations is necessary for maintaining Title IV eligibility and avoiding costly lawsuits. A student information system with a fully integrated financial aid module can centralize student communication, billing, packaging and government reporting.

Title IV Application Process

Ready to apply? Use the E-App at https://eligcert.ed.gov/. In addition to your online application, you’ll need to provide documentation of state licensure, accreditation and two years of audited financial statements.

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Additional sources:

https://studentaid.ed.gov/

http://www.ed.gov/

https://eligcert.ed.gov/

https://ifap.ed.gov/ifap/byAwardYear.jsp?type=fsahandbook&awardyear=2016-2017

Higher Education Accreditation: First Things to Know

The process of accreditation is complex for institutions of higher education–and has been changing significantly over the past few years. To get a handle on the process as it is now, you should understand:

  • The effects for-profit institutions are having on accreditation
  • How the reputational balance between regional and national accreditors is changing
  • The implications of the recent ACICS collapse, and what it says about the difficulties of reputation management
  • How Title IV funds will be affected by growing student debt
  • The importance of tracking and managing student funds resulting from accreditation through a Student Information System (SIS)

The right accreditation can help you validate the value that you offer your students, particularly if you are a less-known institution without an established brand.

Who performs accreditation?

An accreditor is essentially a membership organization made up of the institutions it accredits, and standards are developed by collaboration between the accreditor and the member institutions. It’s more like being a member of a club that cares strongly about its reputation than it is like being supervised by some external agency.

Accrediting organizations must complete a review process overseen by the Department of Education (USDE) and the National Advisory Committee on Institutional Quality and Integrity (NACIQI). The Council for Higher Education Accreditation (CHEA) also reviews accreditors, and its opinion is significant, but the USDE’s approval is key.

Accrediting organizations are either institutional, examining and certifying entire institutions, or programmatic/specialized, certifying particular professional programs.

Institutional accreditation

There are two main types of institutional accrediting organizations

  • Regional, accrediting largely academic, non-profit institutions
  • National, accrediting largely for-profit institutions, with career-oriented programs, though there are also faith-related accreditors for religious institutions.

National accreditors will accredit non-degree institutions, while regionals will not.

There are six regional accreditors, each with a long history. There also six national accreditors, one of which, ACICS has recently run into instructive trouble.

Because of the difference in emphasis, as well as concerns about less-strict standards for national accreditation, students often find trouble transferring credits from a nationally accredited school to a regionally accredited school.

Increasingly, however, more for-profits are gaining regional accreditation. And as they become members of these organizations, their influence over accreditation expectations and process will grow.

Programmatic/specialized accreditors

These certify particular professional programs. There are nearly 50 of these, with multiple accreditors for some programs. Business education, for example, has three possible accrediting organizations.

Programmatic accreditation is essential for programs such as engineering, nursing, or architecture that require professional licensing in order to practice. Some smaller programs in disciplines such as communications may choose not to seek it.

The accreditation process

To get accredited, an institution must perform an extensive self-evaluation, following the procedures of the accrediting organization. There will then be on-site surveys from the accreditor. Once accreditation is achieved, regular updates will be required, though of less intensity than the original application. All of these functions are supported by a Student Information System (SIS).

Accreditor reputation and the fate of ACICS

In September, the USDE stripped the Accrediting Council for Independent Colleges and Schools (ACICS) of its authority to accredit schools. ACICS was the largest of the national accreditorsand was the accreditor for Corinthian Colleges and ITT Technical Institute, both troubled and now-closed for-profit institutions.

Nearly 250 institutions enrolling over half a million students now face the challenge of finding new accreditation, imperiling access to billions of federal educational dollars.

ACICS appealed this decision on October 21, 2016. No matter what the outcome, this is a sobering event for schools that depend on accreditation to maintain their viability, both in terms of reputation and in access to federal educational funds.

Schools can’t just take for granted that their accreditor is giving the best value. During the financial crisis of 2007/2008, credit rating agencies Standard & Poor’s, Fitch, and Moody’s revealed that they had not been objectively measuring the value of what they were recommending. Investors relying on their ratings suffered financial consequences.

Specific criteria for choosing an accreditor will be covered in a later post in this series.

The benefits of accreditation

In a world of many educational institutions competing for students and their associated federal educational funds, accreditation provides useful institutional discipline, participation in a community of like-minded institutions, and ability to contribute to shaping the future standards for educational excellence.

Accreditation also allows newer and smaller educational institutions who do not have the advantage of strong brand visibility, or who are striving to extend their reach, to gain visibility and validation.

And accreditation ensures the steady and predictable flow of federal education dollars, without which most higher education institutions would be unable to function.

The issue of financial aid money

Accreditation not only certifies the quality and reputation of an educational institution’it also controls the distribution of federal financial aid funds as part of Title IV.

It is impossible to recognize the impact of accreditation without understanding how much nearly every institution depends on these funds, including Pell Grants and other academic grants, Federal Family Education and other loan programs, and Federal Work-Study money. Without this funding, many institutions would need to close their doors.

The average full-time undergraduate student in the U.S. received over $2,000 in Pell Grants alone in 2013. The average student now leaves college nearly $23,000 in student-loan debt.

The impact of accreditation is significant both for each institutionand for each student. Institutions need to pay attention to the funding that comes with their students, both for their own bottom line, and to protect the interests of their students. Both of you have a lot of skin in this game.

How accreditation became as important as it is

Why do accreditors also control the flow of federal funds to post-secondary educational institutions? It’s not necessarily an automatic connection.

Before the 1950s, there were a variety of regional, voluntary membership associations that developed standards for anyone claiming to provide higher education. They cared about their reputationsand the reputations of their fellow institutions. The money involved was private money, or from occasional charitable endowments, and did not need to pay attention to accreditation if they did not choose to.

Then the WWII and Korean War GI Bills brought federal dollars to schools, followed, over the next few decades, by the various Title IV funds previously discussed. There was an increasing amount of money involved, which changed the stakes of accreditation.

Instead of creating some kind of Federal Accreditation Agency, the federal government decided instead to use the existing accreditation system to determine eligibility for these federal educational dollars. The government understood that the flexibility of the private system made it worth keeping. That is still the system in place, though government oversight has grown over time, as the amount of money at stake has increased.

Help when facing the accreditation process

A robust Student Information System (SIS) should support your accreditation efforts. Much of the information you supply to the accreditor will come straight out of your SIS. The reporting requirements are significant. Trying to do it without a good SIS can adversely affect your chances of getting accepted by a reputable accreditor. It’s well worth getting an SIS in place before starting an accreditation process.

If you fail to accurately track the Title IV funds that come along with accreditation, you can find you can find yourself subject to costly fines and lawsuits. An SIS helps ensure that the funds are applied to the appropriate tuition, mandatory fees, and housing charges.

Some of the functions you should look at when considering an SIS:

  • Data collection : does the SIS work with your existing business processes to collect and maintain data?
  • Reporting: can the SIS generate the reports required by accreditors and government agencies?
  • Operation management: will the SIS support you in monitoring student achievement, attendance, and satisfaction?

A good SIS not only supports your business operations, but helps keep your students informed, happy, and high performing. It also makes it possible to keep students up to date on the status of their grants, loans, and other sources of support, as well as recommending possible funding sources.

One step at a time

Accreditation is a long and significant process. We’ll be covering the essential steps here over the next few months, so be sure to check back regularly.

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