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FAP

Citations: (R)668.165
AsOfDate: 12/31/95

Disbursing funds.

(a) Method of payment. (1) An institution must notify

a student or, in the case of a PLUS loan, the student's parent of
the amount of title IV, HEA program funds the institution can
expect to receive, and how and when those funds will be paid.

(2) If the institution chooses to disburse to the student

or the student's parent by initiating an electronic funds transfer
to the bank account designated by the student or parent, as
applicable, the institution must obtain authorization from the
student or parent, as applicable, to disburse by that method.

(3) An institution must follow the disbursement

procedures in Sec. 675.16 for paying a student his or her
wages under the FWS Program.

(4) If an institution uses student accounts, an

institution must disburse a Direct Loan Program Loan by
crediting the student's account.

(b) Crediting a student's account at the institution

(1) General. An institution may disburse title IV, HEA program
funds by crediting the student's account at the institution.
Except as provided in paragraph (e) of this section, in crediting
the student's account with title IV, HEA program funds, the
institution may use those funds only to satisfy allowable
charges described under paragraph (b)(3) of this section for the
current award year or period of enrollment. An institution must
notify expeditiously a student or parent borrower in writing or by
equivalent electronic means that the institution has credited the
student's account with Direct Loan, FFEL, or Federal Perkins
Loan program funds. If an institution notifies a student or parent
electronically, it must request the student or parent to confirm
the receipt of the notice and maintain a record of that
confirmation.

(2) Student account balances. Unless otherwise

authorized, by a student or parent borrower, whenever an
institution applies title IV, HEA program funds to a student's
account and determines that an amount of those funds
exceeds, or exceeded, the amount of allowable charges the
institution assessed the student, the institution must pay that
balance directly to the student, or in the case of a PLUS loan to
the parent borrower, as soon as possible but--

(i) For students enrolled at the institution at any time

during the period beginning July 1, 1995 and ending
June 30, 1996, within 21 days of the later of--

(A) The date that balance occurs;

(B) The first day of classes of a payment period or

period of enrollment, as applicable; or

(C) The date the student, or parent borrower rescinds

his or her authorization under paragraph (d) of this section; and

(ii) For students enrolled at the institution on or after

July 1, 1996, within 14 days of the later of the events described
in paragraph (b)(2)(i)(A), (B), or (C) of this section.

(3) Allowable charges. For the purposes of this

section, allowable charges include--

(i) Tuition and fees;

(ii) Board, if the student contracts with the institution

for board;

(iii) Room, if the student contracts with the institution

for room; and

(iv) If an institution obtains the student's or parent's

authorization under paragraph (d) of this section--

(A) Other cost-of-attendance charges, as provided

under section 472 of the HEA, included in that authorization;
and

(B) Other institutional charges that a student incurs at

his or her discretion.

(4) Holding student funds. (i) Except as provided in

paragraph (b)(4)(ii) of this section, an institution, as a fiduciary
for benefit of a student, may hold student funds from the title IV,
HEA programs in excess of institutional charges included in
paragraph (b)(3) of this section, if the student, or in the case of
a PLUS loan the parent borrower, authorizes the institution to
retain the excess funds to assist the student in managing those
funds. If an institution chooses to hold excess student funds,
the institution--

(A) Must identify the student and the amount of the

funds the institution holds for that student in a subsidiary ledger
account designated for that purpose;

(B) Must maintain, at all times, cash in its bank

account for an amount at least equal to the amount of the funds
the institution holds for the student; and

(C) May retain any interest earned on the student's

funds.

(ii) If the Secretary determines that an institution has

failed to meet the standards of financial responsibility under
Sec. 668.15, an institution may not hold a student's excess
funds for this purpose.

(c) Early payments. (1) An institution may not make a

payment to a student for a payment period or period of
enrollment, as applicable, until the student is enrolled for
classes for that period.

(2) Except as provided in paragraph (c)(3) of this

section, the earliest an institution may directly pay, or credit the
account of an enrolled student with title IV, HEA program funds,
or in the case of a PLUS Loan pay the parent borrower is--

(i) 10 days before the first day of a payment period or

period of enrollment, as applicable; and

(ii) For second and subsequent disbursements of

loan funds under the Direct Loan and FFEL programs, 10 days
before the first day of a semester, term, or other period of
enrollment for which that disbursement is intended.

(3) Pursuant to Sec. 682.604(c) and Sec.

685.303(b)(4), if a student is enrolled in the first year of an
undergraduate program of study and the student has not
previously received an FFEL or Direct Loan Program loan, the
institution may not release to the student for endorsement the
first installment of his or her FFEL or Direct Loan Program loan,
as applicable, until 30 days after the first day of the student's
classes.

(d) Student authorization. (1) An institution must

obtain from a student or parent, as applicable, written
authorization allowing the institution to--

(i) Disburse title IV, HEA program funds by initiating

an electronic funds transfer as provided in paragraph (a)(2) of
this section;

(ii) Use the student's or parent's title IV, HEA program

funds to pay for other charges as provided in paragraph
(b)(3)(iv) of this section; or

(iii) Hold excess student funds under paragraph (b)(4)

of this section.

(2) In obtaining authorization for any of these

activities, an institution--

(i) May not require the student or parent to provide

that authorization; and

(ii) Must allow the student or parent to rescind that

authorization at any time.

(3) The authorization granted to an institution is valid

for the award year or period of enrollment in which the
institution obtains that authorization. The Secretary considers
that initial authorization to continue to be valid provided that the
institution notifies the student or parent of the provisions
regarding the student's or parent's current authorization prior to
conducting any of the activities that require that authorization
for any subsequent award year or period of enrollment. The
institution's notice to the student or parent must--

(i) In a plain and conspicuous manner, explain those

provisions, including an explanation regarding any interest that
the institution earns on the student's funds and whether the
institution will provide that interest to the student; and

(ii) Provide the student or parent with the opportunity

to cancel or modify those provisions.

(e) Prior-year charges. An institution may use a

student's title IV, HEA program funds to pay minor prior-year
institutional charges if--

(1) The student has, or will have, a title IV, HEA credit
balance as determined under paragraph (b)(2) of this section;

(2) The institution obtains the student's authorization

to pay these charges; and

(3) The prior-year charges do not exceed $100; or

(4) The payment of these charges does not, or will

not, prevent the student from paying his or her current-year
education costs.

(Authority: 20 U.S.C. 1094)

Note: (a)(4) added; (a)(1), (b)(1), (b)(2) introductory text,

(b)(2)(i)(C), (b)(4)(i) introductory text, (c)(2), (d)(1)(i) and
(d)(1)(iii) amended June 30, 1995, effective July 31, 1995. (b)(1)
amended and (e) added December 1, 1995, effective July 1,
1996.