In a notice published in the Federal Register on December 11, the Department of Education announced several new regulatory waivers to assist institutions, students, and borrowers through the COVID-19 pandemic. ED also extended several waivers it had granted earlier in 2020.
The Higher Education Relief Opportunities for Students (HEROES) Act of 2003 allows ED to issue waivers and modifications of statutory and regulatory provisions governing the Federal Student Aid programs to assist individuals who are affected by a disaster, war, or other military operation or national emergency, such as the COVID-19 pandemic.
Some of the waivers and modifications included in the notice were been announced previously and are now being formalized through publication in the Federal Register. Included below are waivers and modifications business officers should be aware of.
Previously, ED had expanded the broad approval for the use of distance education to include payment periods that overlapped March 5, 2020, or that began on or between March 5 and December 31, 2020. Now, ED has extended that waiver through the end of the payment period that begins after the date on which the federally declared national emergency related to COVID-19 is rescinded. This waiver applies only to ED’s requirements; state requirements may still exist.
Direct Loan Funds If a Student Does Not Begin Attendance
Until the end of the payment period that begins after the national emergency has ended, ED is waiving the requirement that an institution notify the direct loan servicer when a borrower who has received a credit balance payment composed of Direct Loan funds will not begin, or has not begun, attendance. Under normal circumstances, an institution would provide this notification so that the servicer could issue a final demand letter. Under the waiver, the amount of the Direct Loan credit balance will be the borrower’s responsibility to repay under the terms of the promissory note.
Institutions will be permitted to waive the requirement for a parental signature—in the event a student is a dependent—if it cannot be obtained, or accept a signed and photographed/scanned document received by email or text message when validating a student’s Title IV eligibility. This waiver expires at the end of the payment period that begins after the date the national emergency has ended.
Disbursing Title IV Funds to Students
Under current cash management regulations, institutions may disburse Title IV funds by electronic funds transfer only if the EFT is an automated clearinghouse transaction (direct deposit transaction). ED is waiving this requirement to allow institutions and third-party servicers to use any type of EFT under Treasury Department regulations. This includes person-to-person payment methods, such as Zelle and PayPal, or transfers to a checking account using the student’s debit card number (original credit transaction). This waiver also expires at the end of the payment period that begins after the date the national emergency has ended.
Institutions and third-party servicers must ensure these methods comply with disbursement requirements in the cash management regulations. Further, an institution must notify its auditor of the alternative method used as part of its annual compliance audit that the method was used. Regardless of whether any audit deficiencies are identified, the institution/third-party servicer must disclose in the compliance audit the alternative method used and how it was used to make Title IV disbursements.
Heightened Cash Monitoring 1 (HCM1)
ED will allow institutions on HCM1 to submit a request for funds without first paying credit balances due to students for whom those funds were requested. For requests submitted between March 2020 and the end of the payment period that begins after the date on which the COVID-19 national emergency is rescinded, a school must pay the credit balances no later than three calendar days after receiving the funds from ED.
ED is waiving the Federal Work-Study community service requirements for all FWS-participating schools for at least the 2019-20 and 2020-21 award years. Schools do not need to apply for this waiver, which expires at the end of the award year that begins after the date the national emergency is rescinded.
Compliance and Financial Statement Audit Submission Deadlines
For institutions subject to Single Audit Act, ED reiterates that submission deadline dates for eZ-Audit follow the Office of Management and Budget’s deadlines for submission of audited financial statements through the Federal Audit Clearinghouse.
Borrower Defense to Repayment
Borrowers who, prior to July 1, 2020, submitted an application for borrower defense to repayment relief that included a FFEL or Perkins loan and who would need to consolidate those loans into a Direct Consolidation loan to receive relief will have their eligibility adjudicated under the standards for Direct Loans disbursed between July 1, 2017, and July 1, 2020.
Other waivers and modifications included in the notice address:
- Approved leaves of absence
- End of a school’s participation in Title IV programs
- Cohort Default Rate appeals
- Academic calendar flexibility