ED Letter Addresses Minor Prior-Year Charges

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September 9, 2009

On September 4, the Department of Education issued a "Dear Colleague" letter intended to clarify rules on paying minor prior-year charges with Title IV student aid funds. The letter (GEN-09-11) primarily discusses the association of institutional charges to a "year," especially in cases where students are charged upfront for a program that lasts longer than one academic year.

In November 2007, ED modified the cash management regulations under 34 CFR 668.164(d)(2) on disbursement of Title IV aid, increasing from $100 to $200 the amount of current-year aid that could be applied directly to prior-year charges for tuition, fees, room, and board. At the same time, however, it eliminated flexibility in the old regulations that allowed for payment of additional prior-year charges if doing so would not interfere with the student's ability to cover current-year costs.

GEN-09-11 discusses the use of the term "current award year" in the regulation, clarifying that if a student's award package includes a loan (Direct or Federal Family Education Loan) then the year is the loan period. If the student does not have a loan, the year is the award year. The letter then addresses the allocation of charges in certain cases, rare among public and independent institutions, when students are charged upfront for programs more than a year in length.