United States Department of Education Foreign Schools Team Presentation to the International Education Council June 3, 2005 Seattle, Washington AGENDA Federal Family Education Loan Programs Financial Responsibility 2004 Foreign Schools FFEL Overview Financial Statements Study Abroad Programs US GAAP and GAGAS Functions of the Foreign Schools Team Rejection of Financial Statements Eligibility Process Compliance Audits Electronic Eligibility Application Overview of Stafford Loan Process Supporting Documents Guaranty Agencies Foreign School Eligibility Criteria Campus Security (the “Clery Act”) Training Requirement Agreements Between Schools Categories of Participation Distance Education The Eligibility Agreement Third Party Servicers Changes Requiring ED Approval Student Loan Fraud Information Updates FSA Coach for Foreign Schools Additional Locations Upcoming Initiatives Losing Eligibility ED Internet Addresses Student Loan Cohort Default Rates Questions? June 2005 U.S. Department of Education 2 Federal Family Education Loan Programs Federal Stafford Loans Subsidized Unsubsidized Federal PLUS Loans Federal Consolidation Loans June 2005 U.S. Department of Education 3 FFEL Program Relationships Lender Guaranty Agency U.S. Department of Education Loans money to Agrees to reimburse Agrees to reimburse the student the lender if the the guaranty agency borrower borrower defaults in making loan repayments, dies or becomes disabled, or files for bankruptcy protection. The guaranty agency takes assignment of the loan. June 2005 U.S. Department of Education 4 Annual Loan Limits Dependent Undergraduate Student SUB SUB+UNSUB First Year $ 2,625 $2,625 Second Year $ 3,500 $3,500 After Second Year $ 5,500 $5,500 Independent Undergraduate Student First Year $ 2,625 $6,625 Second Year $ 3,500 $7,500 After Second Year $ 5,500 $10,500 Graduate Students Per academic year $8,500 $18,500 June 2005 U.S. Department of Education 5 Aggregate Loan Limits $23,000 for a dependent undergraduate student $46,000 for an independent undergraduate student $138,500 for a graduate or professional student (including loans for undergraduate study) June 2005 U.S. Department of Education 6 2004 Foreign Schools FFEL Overview Countries 43 Schools 774 Loans 39,631 Volume $ 288,408,024 Default rate 2.1% June 2005 U.S. Department of Education 7 IEC Members’ Countries 2004 Volume 45 England $ 44M 40 Canada $ 25M Australia $ 10M 35 Ireland $ 6M 30 25 England Canada Aust ralia 20 Ireland TOTAL $ 85M 15 10 5 0 June 2005 U.S. Department of Education 8 Study Abroad Programs Federal Financial Aid Handled by "Home" U.S. Institution One Semester or One Year of Study Students Studying Abroad Concurrently Remain Enrolled at Home Institution Home Institution Awards Academic Credit for Program of Study June 2005 U.S. Department of Education 9 Functions of the Foreign Schools Team Making Eligibility Determinations Initial applications Recertification applications Eligibility Only (Deferment) applications Change in Ownership applications Reinstatement applications Processing School Information Updates June 2005 U.S. Department of Education 10 Functions of the Foreign Schools Team (cont.) Reviewing Financial Statements Reviewing Compliance Audits Performing Program Reviews Offering Technical Assistance Providing ISIRS to Foreign Schools Providing FFEL Student Lists to Schools Making Referrals for Termination or Fines Making Referrals to Office of Inspector General June 2005 U.S. Department of Education 11 Contacts for ISIRS and Student Lists ISIRS: Contact firstname.lastname@example.org FFEL Student Lists: Contact email@example.com June 2005 U.S. Department of Education 12 Foreign Schools Team M. Geneva Coombs Director, School Participation Teams-NE 202-377-3173 firstname.lastname@example.org Barbara Hemelt Foreign Schools Team Leader 202-377-4201 email@example.com Marcia Fediw Valerie Conrad Kate Winton Linda DeVito Analyst Analyst Analyst Analyst 202-377-3165 202-377-3166 202-377-3280 212-637-6401 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com Joseph Vettickal Stephanie Robertson Jorge Matos Vacant Analyst Program Support Assistant Program Support Assistant Institutional Review Spec. 202-377-3164 202-377-3167 202-377-3168 firstname.lastname@example.org email@example.com firstname.lastname@example.org June 2005 U.S. Department of Education 13 Contacting Us Telephone: (202) 377-3168 Email: email@example.com Fax: (202) 275-3486 Mail: U.S. Department of Education Federal Student Aid Programs Foreign Schools Team, 7th Floor Attention: (Name of Recipient) 830 First Street, NE Washington, D.C. 20202 – 5340 Use 20002 zip for express mail2005 June U.S. Department of Education 14 Eligibility Process School submits an electronic application (E-App) to ED at http://www.eligcert.ed.gov School mails supporting documents to ED Analyst reviews school’s application and supporting documents Foreign Schools Team makes decision to approve or deny the request to participate June 2005 U.S. Department of Education 15 Eligibility Process (cont.) If approved, a Program Participation Agreement (“PPA”) is prepared and sent electronically to the school. The school prints and signs two copies of the PPA then mails both to ED for countersignature ED signs the PPAs and mails a fully-executed original PPA to the school. June 2005 U.S. Department of Education 16 www.eligcert.ed.gov Most Common EAPP Errors “Submit” button not pushed! Non-degree programs that school wishes to be included for loan eligibility not included Correct reason for using the E-App not selected Eligibility updates not sent timely (10 days) June 2005 U.S. Department of Education 18 Supporting Documents for Initial Application (Non-medical) School’s Legal Authorization to Provide Post-Secondary Education and to Award Degrees Copy of School Catalog (English Version) School’s Audited Financial Statements (two most recent fiscal years) June 2005 U.S. Department of Education 19 Supporting Documents for Initial Application (Non-medical) If non-profit, documentation from appropriate governmental entity certifying school’s non-profit status Default Management Plan Paper Signature Page June 2005 U.S. Department of Education 20 Foreign School Eligibility Criteria Legal Authorization Financial Responsibility Administrative Capability Eligible programs Eligible Students June 2005 U.S. Department of Education 21 Additional Criteria for Foreign Medical Schools Approval by an accrediting body that is legally authorized to evaluate the quality of graduate medical school educational programs in the foreign country where the school is located and whose standards of accreditation have been determined by NCFMEA to be comparable to U. S. LCME standards Has Clinical/Classroom instruction of not less than 32 months Has graduated classes in each of the two 12-month periods prior to applying for Title IV participation and is listed by the World Health Organization Has a clinical training program approved by a State within the USA as of January 1, 1992 and currently approved; OR June 2005 U.S. Department of Education 22 Additional Criteria for Foreign Medical Schools Demonstrates that at least 60 percent of the school’s regular, enrolled students are non-US citizens; AND at least 60 percent of its most recent graduating class did not meet US citizenship or permanent residency criteria; AND At least 60 percent of the school’s students and graduates who took any step of the ECFMG examinations received a passing grade in the year preceding the year in which any of the school’s students seek Title IV aid June 2005 U.S. Department of Education 23 TRAINING REQUIREMENT Initial participants Who must attend? CEO/Chancellor or designee and Financial Aid Director School may request a waiver for one or the other Consultants Acting as Financial Aid Directors When? No later than 12 months after the schools signs the PPA. June 2005 U.S. Department of Education 24 Categories of Participation Eligible Deferment Only June 2005 U.S. Department of Education 25 The Eligibility Agreement Program Participation Agreement Eligibility and Certification Approval Report June 2005 U.S. Department of Education 26 Changes Requiring ED Approval Adding a location Increasing the level of program offering Adding degree or non-degree programs outside scope A change in the legal authorizing agency A change in institutional control For medical schools, change in accreditation NO FFEL DISBURSEMENT PRIOR TO ED APPROVAL! June 2005 U.S. Department of Education 27 Information Updates Changes that must be reported but do not require ED approval (10 days) Change to name of school Change in Officials Phone numbers or email addresses of officials Address change of main or additional locations U.S. Administrative or Recruitment offices Closures Third Party Servicers June 2005 U.S. Department of Education 28 Signature Page For any EAPP, don’t forget to send us the Section L Signature Page! Signed by the CEO/Chancellor June 2005 U.S. Department of Education 29 What about “Additional Locations”? Offers 50% or more of an eligible program Not listed on the ECAR ED Approval required before FFEL disbursed to students No Additional Locations Outside School’s Country June 2005 U.S. Department of Education 30 Losing Eligibility Recertification Application Not Submitted Failure to comply with FFEL program requirements Lack of Administrative Capability Excessive Student Loan Default Rates (40%) Financial Responsibility Standards Not Met Loss of Legal Authorization Closing or Ceasing to Provide Educational Programs Fraud June 2005 U.S. Department of Education 31 Student Loan Cohort Default Rates Calculation # of Borrowers who are in Default # of Borrowers who Entered Repayment Thresholds 25% 34 CFR 668(m)(1) 40% 34 CFR 668.187(a) FY 02 Foreign Schools Cohort Default Rate June 2005 2.1%! U.S. Department of Education 32 Student Loan Cohort Default Rates (cont.) Questions about default rates? Contact ED’s Default Management Division Website: http://ifap.ed.gov/DefaultManagement/DefaultManagement.html Email: FSA.Schools.Default.Management@ed.gov Telephone: 202/377-4259 Publication of Rates: www.ed.gov/offices/FSA/defaultmanagement/cdr.html Cohort Default Rate Guide http:ifap.ed.gov/IFAPWebApp/currentDRMaterialsPag.jsp June 2005 U.S. Department of Education 33 Default Management Plan All Schools Must Provide Debt Management Counseling to Students New Schools Must Submit Plan with E-App A Sample Plan is Available at: http://ifap.ed.gov/dcpletters/gen0108.html June 2005 U.S. Department of Education 34 Financial Responsibility Schools must annually submit audited financial statements to the Department Failure to submit annual financial statement = loss of eligibility Federal statute: Higher Education Act, Section 498(c) Federal regulations: 34 CFR 668.171 June 2005 U.S. Department of Education 35 Financial Statements A foreign school that receives $500,000 or more in FFEL funds must submit a financial statement that is audited in accordance with US GAAP and GAS and be in English. A foreign school that receives less than $500,000 must submit a financial statement that can be prepared according to its country’s accounting standards June 2005 U.S. Department of Education 36 US GAAP Generally Accepted Accounting Standards (GAAP) U.S. GAAP is required by law “The determination as to whether an institution has met the standards of financial responsibility.. shall be based on an audited and certified financial statement of the institution. Such audit shall be conducted in accordance with standards established by the American Institute of Certified Public Accountants.” The Higher Education Act, Section 498( c)(5) June 2005 U.S. Department of Education 37 U.S. Government Auditing Standards Established by U.S. Comptroller General Found in “Yellow Book” Consist of: General Standards Field Work Standards Reporting Standards June 2005 U.S. Department of Education 38 ED’s Measurement of Financial Responsibility 1. Financial Statement Composite Score 2. Auditor’s Opinion 3. School meets all its financial obligations June 2005 U.S. Department of Education 39 Financial Responsibility Score Scale Passing Score: 1.5 (range of –1.0 to 3.0) 1.5 to 3.0 Financially responsible 1.0 to 1.4 Not a passing score but in the “Zone”. ED can require additional financial monitoring known as cash monitoring. -1.0 to .9 School fails and is not financially responsible. To participate, school must submit a letter of credit in an amount equal to at least 50% of its FFEL volume. Or a 10% LOC plus additional monitoring plus provisional June 2005 U.S. Department of Education 40 Rejection of Financial Statements Rejection of a Financial Statement = Lack of Financial Responsibility = Loss of Eligibility Reasons for Rejection Over $500,000 in FFEL funds US GAAP and GAS Not Met Under $500,000 in FFEL funds Auditor’s Opinion Letter Not Submitted June 2005 U.S. Department of Education 41 Important Guidance to Auditors From “Dear Colleague Letter” GEN-03-10, August 2003 “Every effort should be made to ensure that audits are conducted in accordance with U.S. Government Auditing Standards. Auditors who cannot comply with some or all of the requirements of U.S. Government Auditing Standards must identify in their reports what auditing standards were used to perform the work and identify how those standards differ from U.S. Government Auditing Standards. Auditors that identify the specific requirements from U.S. Government Auditing Standards with which they cannot comply must identify the portions of the audit related to these requirements and must indicate that they have otherwise complied with the U.S. Government Auditing Standards. Audits that do not indicate full compliance with U.S. Government Auditing Standards will be reviewed by the Department and the Department will determine whether to accept the audits. Audits that do not provide an adequate explanation of why it was not possible to meet the audit standards set out in the regulations will be rejected.” June 2005 U.S. Department of Education 42 Compliance Audit - Requirement An examination of the school’s participation in the FFEL program to determine if the school complied with all program requirements Performed by an independent public accountant Who is an independent public accountant? US: a “Certified Public Accountant” Canada, Australia and United Kingdom: a “Chartered Accountant” Independent foreign government auditors June 2005 U.S. Department of Education 43 Compliance Audit Requirement (cont.) Conducted in accordance with U. S. Government Auditing Standards FSA Audit Guide for Foreign Schools Website: <http://www.ed.gov/about/offices/list/oig/nonfed/ Fgn092402.doc> Submitted annually Due - 6 months after end of school’s fiscal year (No audit = loss of eligibility) June 2005 U.S. Department of Education 44 Compliance Audit - Types If $500,000 or more: Standard Compliance Audit If Less than $500,000: Alternative Compliance Engagement June 2005 U.S. Department of Education 45 Standard Compliance Audit IPA obtains school management’s written assertions IPA tests school management’s written assertions IPA provides written report of findings of noncompliance and associated dollar values IPA reviews prior year’s audits corrective action plans for follow-up School must provide a corrective action plan if IPA finds noncompliance. June 2005 U.S. Department of Education 46 Alternative Compliance Engagement Required management assertions are much less complex IPA does not have to review prior audit and comment on whether school followed up on corrective action plan. File sample is smaller: either 10 files or all files if less than 10 IPA’s report is less complex June 2005 U.S. Department of Education 47 Compliance Audit - Management’s Assertions Management asserts that it has complied with Title IV requirements for: School Eligibility and Participation Enrollment Status Reporting Student Eligibility Processing Loan Proceeds and Counseling Borrowers Treatment of FFEL Funds When Student Withdraws Administrative Capability (e.g., Notifying OIG of Possible Fraud) June 2005 U.S. Department of Education 48 Overview of Stafford Loan Process Student Applies for Aid School Determines Eligibility and Loan Amount School Certifies Student’s Eligibility and Loan Amount Student Completes Master Promissory Note Payment to the Borrower School Provides Entrance and Exit Counseling School Sends Enrollment Status Reports to Guaranty Agency June 2005 U.S. Department of Education 49 Student Status Enrollment Report School Is Required To Make Timely Reports of Borrower Status Enrollment Report received from guaranty agencies School has 30-day response requirement Enrollment Data Used to update NSLDS with: Beginning date of a borrower’s grace period Date borrower will enter repayment or resume making scheduled loan payments June 2005 U.S. Department of Education 50 Actions Required of Guaranty Agencies Before FFEL Loans Are Disbursed: Confirm that the school is eligible to participate in the FFEL program Verify that the student is accepted for enrollment at the foreign school indicated on the loan application (may be performed by the lender also) Student Enrollment Status Reports Continue sending paper Student Enrollment Status Reports to schools that are not connected to NSLDS Program Reviews Perform on or off-site as needed June 2005 U.S. Department of Education 51 Campus Security (the “Clery Act”) Campus Crime and Awareness Act, 34 CFR 668.46 Duty to Compile Crime Statistics Annual Security Report by October 1 Foreign Schools Not Currently Required to Submit Duty to give timely warnings to the campus community Duty to maintain a daily crime log Department if Developing Handbook June 2005 U.S. Department of Education 52 Agreements Between Schools Consortium Agreements Eligible school + Eligible school Contractual Agreements Eligible school + Non-eligible School Ineligible school cannot provide more than 25% of an eligible program Federal Regulation: 34 CFR 668.5 June 2005 U.S. Department of Education 53 Distance Education Federal Regulation 34 CFR 600.7 An otherwise eligible school does not qualify as an eligible institution if during the last award year More than 50% of the school’s courses were correspondence courses, or Fifty percent or more of its regularly enrolled students were enrolled in correspondence courses June 2005 U.S. Department of Education 54 Distance Education Demonstration Program Authorized by Congress 1999 to the present 107 domestic schools Two reports to Congress June 2005 U.S. Department of Education 55 Third Party Servicers School, as principle, is ultimately responsible Must have a written agreement Required contractual provisions Must notify ED 34 CFR 668.25 See also Appendix E, FSA Handbook for Foreign Schools. June 2005 U.S. Department of Education 56 Work Performed by Third-Party Servicers Processing student financial aid applications Performing need analysis Determining student eligibility Certifying loan applications Providing consumer information to students Loan servicing and collection See, 34 CFR 668.2, Definition of Third Party Servicer June 2005 U.S. Department of Education 57 Student Loan Fraud Examples of how students can defraud the FEEL program: Using a false identity to obtain loan funds Forging the signature of school officials on the loan certification document Making false claims of income, citizenship, independent student status June 2005 U.S. Department of Education 58 In Case of Suspected Fraud School Must Notify the Office of Inspector General U.S. Department of Education Oighotline@ed.gov (202) 205-5770 or 1 (800) MISUSED June 2005 U.S. Department of Education 59 FSA Coach for Foreign Schools Web-based training for foreign schools 30 hours of self-paced instruction Eight Modules 1. Introduction to U.S. Federal Student Aid 2. School Requirements to Participate 3. Borrower Eligibility Requirements 4. U.S. Federal Aid Application Process 5. Determining Borrower’s FFEL Eligibility 6. Disbursement of FFEL Proceeds 7. Reporting and Recordkeeping Requirements 8. Return of FFEL Funds When a Student Withdraws From School June 2005 U.S. Department of Education 60 UPCOMING INITIATIVES Update Foreign Schools Handbook Develop “Fundamentals” training Offer “Fundamentals” training in Fall 2005 (U.S. Sites) June 2005 U.S. Department of Education 61 ED Internet Addresses ED’s Homepage: www.ed.gov Electronic Application: http://eligcert.gov Program Participation Agreement ECAR List of Required Updates FSA Schools Portal: http://fsa4schools.ed.gov Information for Financial Aid Professionals (IFAP) Training for Financial Aid Professionals (TFAP) FSA Coach for Foreign Schools FSA Handbook for Foreign Schools SAR/ISIR References Materials And MORE! June 2005 U.S. Department of Education 62 QUESTIONS?
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