Finding Text
FINDING 2025-003 Federal Program Information: Federal Direct Student Loan Program (ALN: 84.268) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): N. Special Test and Provisions – Disbursements To or On Behalf of Students – Loan Disbursement Notification - Federal regulations (34 CFR section 668.165 (a)(6)(i)) require that the institution notify the student, or parent, in writing of (1) the date and amount of the disbursement; (2) the student’s right, or parent’s right, to cancel all or a portion of that loan or loan disbursement and have the loan proceeds returned to the holder of that loan or the TEACH Grant payments returned to ED; and (3) the procedure and time by which the student or parent must notify the institution that he or she wishes to cancel the loan, TEACH Grant, or TEACH Grant disbursement. Institutions that implement an affirmative confirmation process (as described in 34 CFR section 668.165 (a)(6)(i)) must make this notification to the student or parent no earlier than 30 days before, and no later than 30 days after, crediting the student’s account at the institution with Direct Loan or TEACH Grants. The Federal Student Aid Handbook further clarifies that in general, there are two types of notifications a school must provide: (1) a general notification to parent Direct PLUS borrowers and all students receiving Federal Student Aid (“FSA”) funds, and (2) a notice when FSA loan funds or TEACH Grant funds are credited to a student’s account. Condition: Certain borrowers did not receive a loan disbursement notification, or the University was unable to provide a copy of the loan disbursement notification sent to the student. Cause: Administrative oversight and insufficient internal control. Effect: Students and/or parents were not properly notified of loan disbursements and/or their right to cancel/decline loan awards. Questioned Costs: None. Context: For 6 of 40 disbursements tested, the University was unable to provide documentation evidencing an appropriate loan disbursement notification was sent. For 14 of 40 disbursements tested, the corresponding notification was not sent within the required timeframe. Identification of Repeat Finding: This is a repeat of prior year finding 2024-004. Recommendation: We recommend the University enhance its procedures and internal controls over loan disbursement notifications to ensure that such notifications are sent to student and/or parent borrowers within the required timeframe. Views of Responsible Officials and Planned Corrective Actions: We implemented a process which assigns communications management codes based on transmittal activity of each federal direct loan. On the same day a loan is disbursed, our system applies the appropriate code to the student record. These codes are then automatically selected for the correct loan disbursement notification to be sent either to the student or parent based on the federal loan type.