Checking the list, checking it twice: Title IV Refunding

Check_Marks_shutterstock_137631572.jpgI know, wrong time of year for that jingle but I am not referring to a naughty or nice list but to an important list to check twice as deadlines are approaching. 

What list am I referring to?

I am referring to the changes that need to be made in order to be compliant with the newly released rules published by the DOE regarding Cash Management and Title IV refunding.  (Some by July 2016, some by September 2016 and more for July and September of 2017.)

To assist you in ensuring compliance with new regulations, we have partnered with NACUBO to create a checklist that keeps you on top of all the new requirements and their corresponding deadlines.

Note:  the content contained in this blog is for informational purposes only and it does not, and is not intended to, constitute a legal opinion or legal advice and should not be relied upon as such.

Some Background:

Under the new regulations, if you contract with a third party to market a financial account, you will fall under either a Tier One or Tier Two relationship with few exceptions.  Having either a Tier One or Tier Two relationship means there are new requirements for these accounts and managing them includes new requirements governing:

  • Student choice
  • Account fee control
  • ATM access
  • Required oversight by institutions (Universities/Schools)

 A Tier 1 Arrangement – is an arrangement between a third-party servicer and an institution that meets the following criteria: 

  • Contract with a third-party servicer under which they provide one or more of the functions associated with processing direct payments of Title IV Funds
  • The third-party makes payments to financial accounts offered to the students
  • Information about the account is communicated directly to the student by third-party or university

A Tier 2 Arrangement – is an arrangement where a financial institution or agent markets information about the account directly to students enrolled at the university.  The Secretary considers that a financial account marketed directly if any of the following conditions apply:

  • University communicates information directly to its students about the financial account and how it may be opened
  • The financial account or access device is cobranded and is marketed principally to students at the institution (university)
  • A card or access device is provided for other institutional use such as a student ID card

Provisions for disclosure of contract data, ATM requirements and the best interest due diligence only applies to institutions with:

  • At least 5 percent of the average enrollment for the three most recently completed award years with a credit balance
  • Or an average of at least 500 students with a credit balance for the three most recently completed award years

Now that we have introduced you to the definition of T1 and T2, let’s look at some of the impacts of that designation.  One of the first and most prominent consequences is that many of the best practices described above regarding student choice now become a requirement.  If you have a T1 or T2 relationship you must offer a selection tool that does the following by the dates noted in the checklist.

 

For additional information on the five critical aspects of a refund program that improves service to students, ensures regulatory compliance and drives institutional efficiencies, download our complimentary eBook

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Craig Lockwood, President, TMS

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