United States Department of Education

1
United States Department of Education

• Foreign Schools Team Presentation to the
• International Education Council
• June 3, 2005
• Seattle, Washington

2
AGENDA

• Federal Family Education Loan Programs
• 2004 Foreign Schools FFEL Overview
• Study Abroad Programs
• Functions of the Foreign Schools Team
• Eligibility Process
• Electronic Eligibility Application
• Supporting Documents
• Foreign School Eligibility Criteria
• Training Requirement
• Categories of Participation
• The Eligibility Agreement
• Changes Requiring ED Approval
• Information Updates
• Additional Locations
• Losing Eligibility
• Student Loan Cohort Default Rates

• Financial Responsibility
• Financial Statements
• US GAAP and GAGAS
• Rejection of Financial Statements
• Compliance Audits
• Overview of Stafford Loan Process
• Guaranty Agencies
• Campus Security (the Clery Act)
• Agreements Between Schools
• Distance Education
• Third Party Servicers
• Student Loan Fraud
• FSA Coach for Foreign Schools
• Upcoming Initiatives
• ED Internet Addresses
• Questions?

3
Federal Family Education Loan Programs

• Federal Stafford Loans
• Subsidized
• Unsubsidized
• Federal PLUS Loans
• Federal Consolidation Loans

4
FFEL Program Relationships
5
Annual Loan Limits

• Dependent Undergraduate Student SUB
  SUBUNSUB
• 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

6
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)

7
2004 Foreign Schools FFEL Overview

• Countries 43
• Schools 774
• Loans 39,631
• Volume 288,408,024
• Default rate 2.1

8
IEC Members Countries 2004 Volume

• England 44M
• Canada 25M
• Australia 10M
• Ireland 6M
• TOTAL 85M

9
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

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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

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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

12
Contacts for ISIRS and Student Lists

• ISIRS
• Contact valerie.conrad_at_ed.gov
• FFEL Student Lists
• Contact kathryn.winton_at_ed.gov

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Foreign Schools Team
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Contacting Us

• Telephone [phone]
• Email fsa.foreign.schools_at_ed.gov
• Fax [phone]
• 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 mail

15
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 schools application and
  supporting documents
• Foreign Schools Team makes decision to approve or
  deny the request to participate

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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.

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www.eligcert.ed.gov
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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)

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Supporting Documents for Initial Application
(Non-medical)

• Schools Legal Authorization to Provide
  Post-Secondary Education and to Award Degrees
• Copy of School Catalog (English Version)
• Schools Audited Financial Statements (two most
  recent fiscal years)

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Supporting Documents for Initial Application
(Non-medical)

• If non-profit, documentation from appropriate
  governmental entity certifying schools
  non-profit status
• Default Management Plan
• Paper Signature Page

21
Foreign School Eligibility Criteria

• Legal Authorization
• Financial Responsibility
• Administrative Capability
• Eligible programs
• Eligible Students

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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

23
Additional Criteria for Foreign Medical Schools

• Demonstrates that at least 60 percent of the
  schools 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 schools 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 schools
  students seek Title IV aid

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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.

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Categories of Participation

• Eligible
• Deferment Only

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The Eligibility Agreement

• Program Participation Agreement
• Eligibility and Certification Approval Report

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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!

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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

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Signature Page

• For any EAPP, dont forget to send us the Section
  L Signature Page!
• Signed by the CEO/Chancellor

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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 Schools Country

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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

32
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
• 2.1!

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Student Loan Cohort Default Rates (cont.)

• Questions about default rates?
• Contact EDs Default Management Division
• Website http//ifap.ed.gov/DefaultManagement/Def
  aultManagement.html
• Email FSA.Schools.Default.Management_at_ed.gov
  
• Telephone [phone]
• Publication of Rates
• www.ed.gov/offices/FSA/defaultmanagement/cdr.html
  
• Cohort Default Rate Guide
• httpifap.ed.gov/IFAPWebApp/currentDRMaterialsPag.
  jsp

34
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

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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

36
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 countrys accounting
  standards

37
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)

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U.S. Government Auditing Standards

• Established by U.S. Comptroller General
• Found in Yellow Book
• Consist of
• General Standards
• Field Work Standards
• Reporting Standards

39
EDs Measurement of Financial Responsibility

• 1. Financial Statement Composite Score
• 2. Auditors Opinion
• 3. School meets all its financial obligations

40
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

41
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
• Auditors Opinion Letter Not Submitted

42
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.

43
Compliance Audit - Requirement

• An examination of the schools 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

44
Compliance Audit Requirement (cont.)

• Conducted in accordance with
• U. S. Government Auditing Standards
• FSA Audit Guide for Foreign Schools
• Website lthttp//www.ed.gov/about/offices/list/oi
  g/nonfed/Fgn092402.docgt
• Submitted annually
• Due - 6 months after end of schools fiscal year
  (No audit loss of eligibility)

45
Compliance Audit - Types

• If 500,000 or more
• Standard Compliance Audit
• If Less than 500,000
• Alternative Compliance Engagement

46
Standard Compliance Audit

• IPA obtains school managements written
  assertions
• IPA tests school managements written assertions
• IPA provides written report of findings of
  noncompliance and associated dollar values
• IPA reviews prior years audits corrective action
  plans for follow-up
• School must provide a corrective action plan if
  IPA finds noncompliance.

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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
• IPAs report is less complex

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Compliance Audit - Managements 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)

49
Overview of Stafford Loan Process

• Student Applies for Aid
• School Determines Eligibility and Loan Amount
• School Certifies Students 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

50
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 borrowers grace period
• Date borrower will enter repayment or resume
  making scheduled loan payments

51
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

52
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

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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

54
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 schools courses were
  correspondence courses, or
• Fifty percent or more of its regularly enrolled
  students were enrolled in correspondence courses

55
Distance Education Demonstration Program

• Authorized by Congress
• 1999 to the present
• 107 domestic schools
• Two reports to Congress

56
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.

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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

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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

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In Case of Suspected Fraud

• School Must Notify the
• Office of Inspector General
• U.S. Department of Education
• Oighotline_at_ed.gov
• [phone]
• or
• 1 (800) MISUSED

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FSA Coach for Foreign Schools

• Web-based training for foreign schools
• 30 hours of self-paced instruction
• Eight Modules
• Introduction to U.S. Federal Student Aid
• School Requirements to Participate
• Borrower Eligibility Requirements
• U.S. Federal Aid Application Process
• Determining Borrowers FFEL Eligibility
• Disbursement of FFEL Proceeds
• Reporting and Recordkeeping Requirements
• Return of FFEL Funds When a Student Withdraws
  From School

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UPCOMING INITIATIVES

• Update Foreign Schools Handbook
• Develop Fundamentals training
• Offer Fundamentals training in Fall 2005 (U.S.
  Sites)

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ED Internet Addresses

• EDs 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!

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• QUESTIONS?