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IFAP
FSA Information for Financial Aid Professionals
U.S. Department of Education

Citations: (R)668.165
AsOfDate: 12/1/94

Sec. 668.165 Disbursing funds.

(a) Method of payment. (1) An institution must notify a

student or the student's parent of the amount of title IV, HEA
program funds the student can expect to receive, and how and when
those funds will be paid.

(2) If the institution chooses to disburse to the student or

the student's parent by initiating an electronic funds transfer to the
bank account designated by the student or parent, as applicable, the
institution must obtain authorization from the student or parent, as
applicable, to disburse by that method.

(3) An institution must follow the disbursement procedures

in Sec. 675.16 for paying a student his or her wages under the FWS
Program.

(b) Crediting a student's account--(1) General. An

institution may disburse to a student by crediting the student's
account. In crediting the student's account with title IV, HEA program
funds, the institution may apply those funds only to allowable charges
described under paragraph (b)(4) of this section, except that the
institution may not apply the student's title IV, HEA program funds to
any charges the institution assessed the student in a prior award year
or period of enrollment. An institution must provide written notification
expeditiously to a student or parent, as applicable, that the institution
has credited the student's account with Direct Loan or FFEL program
funds.

(2) Student account balances. Unless otherwise authorized,

by a student, whenever an institution applies title IV, HEA program
funds to a student's account and determines that an amount of those
funds exceeds, or exceeded, the amount of allowable charges the
institution assesses the student, the institution must pay that balance
directly to the student as soon as possible but--

(i) For students enrolled at the institution at any time during

the period beginning July 1, 1995 and ending June 30, 1996, within 21
days of the later of--

(A) The date that balance occurs;

(B) The first day of classes of a payment period or period of

enrollment, as applicable; or

(C) The date the student rescinds his or her authorization

under paragraph (d) of this section; and

(ii) For students enrolled at the institution on or after July

1, 1996, within 14 days of the later of the events described in
paragraph (b)(2)(i)(A), (B), or (C) of this section.

(3) Allowable charges. For the purposes of this section,

allowable charges include--

(i) Tuition and fees;

(ii) Board, if the student contracts with the institution for

board;

(iii) Room, if the student contracts with the institution for

room; and

(iv) If an institution obtains the student's or parent's

authorization under paragraph (d) of this section--

(A) Other cost-of-attendance charges, as provided under

section 472 of the HEA, included in that authorization; and

(B) Other institutional charges that a student incurs at his

or her discretion.

(4) Holding student funds. (i) Except as provided in

paragraph (b)(4)(ii) of this section, an institution, as a fiduciary for the
benefit of a student, may hold student funds from the title IV, HEA
programs in excess of institutional charges included in paragraph
(b)(3) of this section, if the student authorizes the institution to retain
the excess funds to assist the student in managing those funds. If an
institution chooses to hold excess student funds, the institution--

(A) Must identify the student and the amount of the funds
the institution holds for that student in a subsidiary ledger account
designated for that purpose;

(B) Must maintain, at all times, cash in its bank account for
an amount at least equal to the amount of the funds the institution
holds for the student; and

(C) May retain any interest earned on the student's funds.

(ii) If the Secretary determines that an institution has failed

to meet the standards of financial responsibility under Sec. 668.15, an
institution may not hold a student's excess funds for this purpose.

(c) Early payments. (1) An institution may not make a

payment to a student for a payment period or period of enrollment, as
applicable, until the student is enrolled for classes for that period.

(2) Except as provided in paragraph (c)(3) of this section,

the earliest an institution may pay directly or credit the account of an
enrolled student is 10 days before--

(i) The first day of a payment period or period of

enrollment, as applicable; and

(ii) For second and subsequent disbursements of loan funds

under the Direct Loan and FFEL programs, the first day of a
semester, term, or other period of enrollment for which that
disbursement is intended.

(3) Pursuant to Sec. 682.604(c) and Sec. 685.303(b)(4), if a

student is enrolled in the first year of an undergraduate program of
study and the student has not previously received an FFEL or Direct
Loan Program loan, the institution may not release to the student for
endorsement the first installment of his or her FFEL or Direct Loan
Program loan, as applicable, until 30 days after the first day of the
student's classes.

(d) Student authorization. (1) An institution must obtain

from a student or parent, as applicable, written authorization allowing
the institution to--

(i) Disburse title IV, HEA program funds by initiating an

electronic funds transfer as provided in paragraph (b)(2) of this
section;

(ii) Use the student's or parent's title IV, HEA program

funds to pay for other charges as provided in paragraph (b)(3)(iv) of
this section; or

(iii) Hold excess student funds under paragraph (c) of this

section.

(2) In obtaining authorization for any of these activities, an

institution--
(i) May not require the student or parent to provide that
authorization; and

(ii) Must allow the student or parent to rescind that

authorization at any time.

(3) The authorization granted to an institution is valid for

the award year or period of enrollment in which the institution obtains
that authorization. The Secretary considers that initial authorization to
continue to be valid provided that the institution notifies the student
or parent of the provisions regarding the student's or parent's current
authorization prior to conducting any of the activities that require that
authorization for any subsequent award year or period of enrollment.
The institution's notice to the student or parent must--

(i) In a plain and conspicuous manner, explain those

provisions, including an explanation regarding any interest that the
institution earns on the student's funds and whether the institution will
provide that interest to the student; and

(ii) Provide the student or parent with the opportunity to

cancel or modify those provisions.

(Authority: 20 U.S.C. 1094)