Cash Management Regulations

Cash management regulations establish rules and procedures that a school must follow in requesting, maintaining, disbursing, and otherwise managing Title IV funds. On October 30, 2015, the Department of Education finalized new cash management rules, followed by technical corrections in April 2016. Many of these regulations apply to all institutions, but some only affect schools that have arrangements with banks and third-party servicers processing Title IV credit balance refunds.

There are two types of arrangements in the final cash management rules: Tier One (T1), and Tier Two (T2). The regulations require colleges and universities to disclose the contract establishing a T1 or T2 arrangement on their website and provide the Department of Education with the contract's URL. A brief description of T1 and T2 arrangements is below.

Tier One (T1) Arrangements. A higher education institution has a Tier One (T1) relationship if it arranges for a third-party servicer to process direct payments of Title IV funds on its behalf. In addition, to qualify as a T1 arrangement, the third-party servicer must either offer at least one financial account under the arrangement or market an account to students, either directly or through another entity.

Tier Two (T2) Arrangements. A school has a Tier Two (T2) relationship if it allows banks to offer and market accounts directly to students. Any account that can be linked to a student ID will be considered at a minimum to be an account under a T2 arrangement. However, if a school had at least one student with a Title IV credit balance refund in each of the three most recently completed award years, only certain provisions of the T2 regulations apply. Because of this lower threshold, NACUBO informally refers to these arrangements as “Tier Two, Lower Threshold” (T2-L).

NACUBO has worked extensively on Department of Education regulations related to cash management. See below for more content.

Cash Management Overview

Overview of final 2015 cash management rules (November 16, 2015)
Overview of provisions that apply to all institutions receiving Title IV funds (November 16, 2015)
Overview of technical corrections to cash management rules from ED (April 15, 2016)
Summary of Tier One Arrangements (November 16, 2015)
Summary of Tier Two Arrangements (November 16, 2015)
Summary of Tier Two, Lower Threshold (T2-L) Arrangements (November 16, 2015)

Disclosures & Reporting

Analysis of ED guidance on banking arrangements (June 26, 2017)
NACUBO's comment letter to ED addressing disclosures for student financial accounts (June 8, 2017)
Update on notice from ED seeking feedback on fee disclosure format (May 15, 2017)
Update on ED guidance for bank fee reporting (September 16, 2016)
Summary of ED guidance on how to submit contracts for banking and processing relationships (July 8, 2016)

Miscellaneous Updates

Overview of R2T4 and proration of books and supplies under cash management rules (April 12, 2019)
Update on developments in creating an app payment vehicle (October 29, 2018)
Break down of ED's guidance on third-party servicer requirements and responsibilities (September 2, 2016)
Overview of ED's supplemental cash management guidance (May 16, 2016)

NACUBO Tools

A flowchart to help institutions identify which arrangements they might have.
A matrix explaining the requirements for T1, T2, and T2-L arrangements.
Cash Management Checklist (July 2016)
NACUBO In Brief podcast, Episode 1: Cash Management (November 12, 2015)
NACUBO's archives on Department of Education regulations

ED Resources

Final Cash Management Rules

Final 2015 Cash Management Rules (October 30, 2015)
- Technical Corrections to Cash Management Rules (April 7, 2016)

Other Rules-Specific Resources

ED's "Cash Management Information" webpage
Dear Colleague Letter on Third-Party Servicer Institutional Requirements and Responsibilities (January 9, 2015)
Third-Party Servicer Questions and Answers related to the 2015 DCL (August 18, 2016)
ED database for Title IV institutions reporting cash management contracts
Electronic announcements on cash management rules

Other External Resources

Safe Student Account Toolkit from the Consumer Financial Protection Bureau (December 16, 2015)

To visit other pages with SFS content related to Department of Education regulations, click below:

SFS Regulations ED Regulations ED Archives

Contact

Bryan Dickson

Director, Student Financial Services and Educational Programs

202.861.2505

Student Financial Services

Student financial services (SFS) describes how colleges and universities provide students and families with finance-related services, such as applying for financial aid and paying a tuition bill, along with the associated business processes necessary to pay for college. SFS professionals manage the policies and procedures related to a student's account, which tracks tuition and other charges, payments, and application of financial aid.

ED Takes Next Steps in Developing App Payment Vehicle

Features will include providing a no-fee payment option to participating students, streamlining schools’ processing of Title IV credit balance refunds, and promoting the interaction between the Office of Federal Student Aid and borrowers.

ED Publishes Guidance on Year-Round Pell and Banking Arrangements

The Department of Education has released information on the implementation of the expanded Pell Grant Program, which begins July 1 and will allow students to receive additional aid during the summer months. Separately, ED provided guidance on the required format for reporting contract data for certain banking arrangements.