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					  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 valerie.conrad@ed.gov

  FFEL Student Lists:
  Contact kathryn.winton@ed.gov



June 2005         U.S. Department of Education   12
                    Foreign Schools Team


                                                                                                       M. Geneva Coombs
                                                                                            Director, School Participation Teams-NE
                                                                                                          202-377-3173
                                                                                                    geneva.coombs@ed.gov

                                              Barbara Hemelt
                                       Foreign Schools Team Leader
                                               202-377-4201
                                          barbara.hemelt@ed.gov


    Marcia Fediw                Valerie Conrad                Kate Winton                Linda DeVito
        Analyst                      Analyst                    Analyst                     Analyst
    202-377-3165                 202-377-3166                202-377-3280                212-637-6401
 marcia.fediw@ed.gov        valerie.conrad@ed.gov       kathryn.winton@ed.gov        linda.devito@ed.gov

    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
joseph.vettickal@ed.gov   stephanie.robertson@ed.gov      jorge.matos@ed.gov




       June 2005                               U.S. Department of Education                                                13
            Contacting Us

   Telephone: (202) 377-3168
   Email:
    fsa.foreign.schools@ed.gov
   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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