With the cost of college and professional training soaring, financial aid is a lifeline for many students, but Title IV financial aid reporting is a complex process. Your school plays a critical role in helping students fund their education with federal loans and grants.
Schools can’t manage these complexities on their own. A best-in-class student information system (SIS) gives your team the tools to administer Title IV financial aid in-house or with a third-party provider.
Whether your school is just starting the process of gaining eligibility for Title IV federal aid or looking to better coordinate financial aid management and reporting, you need to have a clear understanding of how to track and report on Title IV funding.
In this article, we’ll outline the key components of Title IV financial aid and reporting:
- Overview of Title IV Funding
- How Schools Manage Student Financial Aid
- The Federal Student Aid Process and Types of Aid
- Achieving and Maintaining Title IV Accreditation
- Tracking and Reporting Title IV Financial Aid Data
- How a Student Information System Makes Title IV Financial Aid Reporting Easier
Overview of Title IV Funding
In 2021, 10.5 million students received $125 billion in federal student aid through the U.S Department of Education to help cover the cost of college. These include fixed costs like tuition, fees, and room and board, as well as expenses like supplies, computers, books and transportation. These funds are distributed in the form of grants, loans and work-study programs, and are only available to eligible students enrolled in eligible programs at qualified schools.
How Schools Manage Student Financial Aid
The federal government requires schools that receive federal financial aid to distribute these funds to their students. The most common forms of financial aid are administered by the U.S. Department of Education under Title IV of the Higher Education Act of 1965. This program helps millions of students attend college, but there are stringent rules for reporting and it requires a lot of organization from your financial aid and business teams.
This is why a student information system is so important for Title IV financial aid. Federal rules require schools to submit reports on their students’ eligibility and attendance, data on their student population receiving aid, and to track the disbursement of funds. That adds up to mountains of data and information that needs to be sorted, analyzed and packaged.
The best student information systems help schools more efficiently manage financial aid reporting in-house or integrate with third-party financial aid providers. With the right software, it can provide you with detailed and accurate information to process student aid quickly.
A fully integrated student information system with a financial aid module centralizes student communication, billing, packaging and government reporting. This makes your financial aid work more reliable and keeps your school compliant with Title IV requirements.
If reports are wrong or improperly filed, your students might not receive their payments and, even worse, your school could lose its Title IV eligibility, forcing students to withdraw from your programs and hindering your future recruiting efforts.
The Federal Student Aid Process and Types of Aid
To qualify for Title IV funds, a student needs to be a U.S. citizen, demonstrate financial need, have completed high school or an equivalent program (such as a GED certificate), have a valid Social Security number, and be enrolled or accepted into a degree or certificate program at a higher education school that is eligible for Title IV. (There are some qualifying exceptions and circumstances.)
Once a student has established their eligibility, they must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA application determines their financial aid eligibility for Title IV programs, including loans, grants and work-study programs.
Next, schools prepare a financial aid award letter notifying a student of the type and amount of federal aid they will receive. These include loans, grants and work-study programs.
Federal Student Loans
Also known as government loans, this type of aid lets students and their parents or guardians borrow money for college directly from the federal government.
- 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. (Sub Loan limit: $3,500-$5,500/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. (Total Loan limit: $5,500-$12,500/year for undergraduate; up to $20,500 for graduate)
- Direct Graduate PLUS Loans: Given to graduate or professional students or to parents of undergraduates enrolled at participating schools.
Federal Student Grants
The U.S. Department of Education offers federal grants to students attending four-year colleges or universities, community colleges and career schools. Unlike loans, these do not have to be repaid.
- Federal Pell Grant: Amounts change yearly, but the maximum award for the 2022-23 academic year is $6,895. An individual student’s award is determined by the government based on financial need, school cost and attendance plans. This grant is not 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.
- 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 the availability of funds. The SEOG is not repaid by the student.
- 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.
Federal Work Study Program
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.
Once a student qualifies for Title IV federal aid, they must retain their eligibility to continue to receive funds. If they withdraw or drop out, they may have to return some of the funds they receive. A student information system tracks this information so any adjustments to aid packages can be easily made.
Achieving and Maintaining Title IV Accreditation
Offering Title IV financial aid to your students is a major selling point for your school. Today’s students need help financing their education and it is challenging to navigate the federal loan process. If your school offers federal financial aid, you’ll be a more attractive choice for their education.
If you’re not currently a Title IV institution, it can take years to qualify, but that’s no reason to not work toward it. To earn eligibility, the U.S. Department of Education requires that schools offer a certain level of quality instruction and training, and to demonstrate they can meet the requirements to administer federal dollars, including financial responsibility and sufficient cash reserves. Schools must also offer financial aid counseling and reconciliation of fiscal and financial aid offices, among other eligibility requirements.
Once your school qualifies for Title IV accreditation, your school must actively work to maintain accreditation. Higher education institutions are certified for up to six years before they must reapply.
Tracking and Reporting Title IV Financial Aid Data
Once your school is accredited to administer Title IV financial aid, there’s a lot that happens behind the scenes. Schools are required to maintain databases of student information, including who qualifies for aid and which type, and how and when the funds are distributed. You’ll also need to provide information to students and the IRS.
In addition to the initial disbursement of funds, schools can also face situations that require an extra layer of management. For example, over-awarding aid due to a change in a student’s financial situation or having to return Title IV funds if a student withdraws from the school.
An integrated student information system can help your school manage and track all the necessary data and generate the proper reports on time. That keeps all the trains running on schedule, gets financial aid funds to your students on time and maintains your Title IV obligations.
Common Reports, Forms and Documents for Title IV Reporting
Here are some of the most common items that a school will need to track and report. Campus Cafe has a library of pre-built reporting templates so you don’t have to start from scratch. What’s more, these forms are updated whenever there’s a change in requirements, so your team will always have the correct reports and forms.
National Student Loan Data System (NSLDS)
The National Student Loan Data System (NSLDS database is the central source of truth for student federal aid containing all the necessary data for federal student aid loans and grants). To facilitate the submission of data to NSLDS, schools can utilize the National Clearing House, which is a free service for reducing friction and data accuracy in the enrollment submission process.
The Integrated Postsecondary Education Data System (IPEDS)
IPEDS collects data for the National Center for Education Statistics, a division of the Department of Education. Schools with 15 or more full-time employees are required to report to IPEDS on subjects including the following:
- Enrollment: Information on your students’ 12-month enrollment that includes the number of full- and part-time students; race, gender and ethnicity; instructional activity; and full- and part-time enrollment.
- Completion: Schools must collect information on what degrees students have earned and the number of programs completed. They also need to submit data on race, gender and ethnicity of those students, and if degrees were distance or in-person.
- Graduation: Information on the number of full-time, first-time degree or certificate-seeking students, as well as the race, gender and ethnicity of those students. You’ll also report the number of students who complete their coursework within 150 percent of the normal program time, as well as those that have transferred.
Federal Financial Aid Reporting Requirements
- Disbursement by Award: Schools must distribute federal aid funds, including loans and grants, to qualifying students. These payments are usually made in one or two installments.
- Entrance and Exit Counseling: Based on the type of federal loan a student receives, they’re required to participate in entrance counseling to ensure they understand their funding, repayment requirements and how to manage educational expenses. When a student graduates, goes part time or leaves school, they’re required to complete exit counseling.
- Master Promissory Note (MPN): This is a legal document where the student promises to pay back any loans, fees and interest to the government, and it outlines the terms and conditions of a loan. In this letter, the school advises the student on what loans they’re eligible to receive.
- Verification: To establish a student’s eligibility for federal aid, you’ll need to collect documentation including tax returns, W-2 statements and 1099 forms and verify it matches the information the student submitted on their FAFSA application.
- Reconciliation: To ensure that federal funds are used as intended, schools are required to regularly compare their Title IV aid records with Department of Education records and report any inconsistencies. Schools are required to document their reconciliation and retain the information in case of an audit. It is recommended schools perform a reconciliation monthly and have both their business and financial aid office participate.
- 90/10 Summary: Under federal law, schools can only derive 90 percent of their revenue from financial aid and the remaining 10 percent must come from alternative sources.
- R2T4 Return to Title IV: If a student withdraws from school during an enrollment period after receiving federal aid funds, schools must calculate how much the student received in aid and what needs to be returned.
- FISAP for Federal Work Study and FSEOG programs: Schools use these forms to apply for campus-based funding and to report expenditures from the previous year. This information is submitted to the Department of Education.
- Tax 1098-T: Schools are required to file a tuition statement reporting a student’s qualified tuition and related educational expenses with the Internal Revenue Service. This form must be available to the IRS, students and their parents.
- Satisfactory Academic Progress (SAP): Schools are required to monitor the academic progress of their students receiving federal financial aid. They must report successful completion of coursework or programs towards a degree or certification. If students do not maintain minimum grade requirements, they could be placed on probation or lose their federal aid eligibility.
- Gainful Employment: While currently suspended, this former requirement mandated that schools report comparisons of their graduates’ earnings with their student debt, and provide information on completion rates and debt by program. If students earned too little after graduation, schools could lose their ability to administer federal aid. The rule was removed by the former Trump administration, but President Biden’s Department of Education has proposed reinstating regulations.
Keeping Up With Financial Aid Reporting Cycles
To add to the complexity of financial aid reporting, federal regulations require schools to submit information on different schedules. For instance, IPEDS, FISAP and 90/10 data must be submitted annually. Form 1098-T must also be filed annually. An R2T4 must be submitted every time a student drops or withdraws from a course. And it’s recommended that schools perform reconciliation at least monthly.
How a Student Information System Makes Title IV Financial Aid Reporting Easier
From tracking internal data to required federal filings, administering Title IV financial aid requires extensive data management and organization. If deadlines are missed or information is inaccurate, students could lose their funding or face delays in disbursement.
Schools with an integrated student information system that includes financial aid software can manage every important detail, coordinate between departments, and efficiently and accurately generate the right reports every time.
Want to see Campus Cafe’s financial aid module in action? Contact us today for a free demo.