Finding Text
Finding number: 2022-005
Federal agency: U.S. Department of Education
Programs: Student Financial Assistance Cluster
Assistance Listing #: 84.268
Award year: 2022
Compliance Requirement: Special Tests
Criteria
According to 34 CFR Section 685.303 (b)(5)(i):
If a student is enrolled in the first year of an undergraduate program of study and has not
previously received a Direct Subsidized Loan, a Direct Unsubsidized Loan, a Subsidized
or Unsubsidized Federal Stafford Loan, or a Federal Supplemental Loan for Students, a
school may not disburse the proceeds of a Direct Subsidized or Direct Unsubsidized Loan
until 30 days after the first day of the student's program of study unless-
(A) (1) Except as provided in paragraph (b)(5)(i)(A)(2) of this section, the school has a
cohort default rate, calculated under subpart M of 34 CFR part 668, or weighted
average cohort rate of less than 10 percent for each of the three most recent fiscal
years for which data are available; or
(2) For loans first disbursed on or after October 1, 2011, the school in which the
student is enrolled has a cohort default rate, calculated under either subpart M or N
of 34 CFR part 668 of less than 15 percent for each of the three most recent fiscal
years for which data are available;
(B) The school is an eligible home institution originating a loan to cover the cost of
attendance in a study abroad program and has a Direct Loan Program cohort rate,
FFEL cohort default rate, or weighted average cohort rate of less than 5 percent for
the single most recent fiscal year for which data are available.
Condition
The Federal Government requires the College not to disburse the first installment of Direct loans
to first-year undergraduates who are first time borrowers until 30 days after the student’s first day
of classes. During our testing, we noted 3 students, out of a sample of 40, who had not previously
received direct loans and were disbursed loans within the first 30 days after the student’s first day
of classes. Our sample was not, and was not intended to be, statistically valid.
Cause
The College did not have adequate internal controls in place to validate that Direct loans were not
disbursed to first-year undergraduates who are first time borrowers until 30 days after the student’s
first day of classes.
Effect
The College disbursed loans to students before they were eligible to receive them.
Questioned Costs
Not applicable
Identification as a Repeat Finding, if applicable
Not applicable
Recommendation
The College should implement internal controls to ensure that Direct loans are not disbursed to
first-year undergraduates who are first time borrowers until 30 days after the student’s first day of
classes.
View of Responsible Officials
The College agrees with the finding.