Financial Aid - State

CHAPTER 31 FINANCIAL AID - STATE

1.0 OVERVIEW AND DEFINITIONS:

Sections 1.1 and 1.2 are generally from the Financial Aid website. For the most up-to-date information, please visit the Financial Aid Programs website. This chapter will focus on financial aid funded by the State.

1.1 Introduction

Financial aid programs provide support for students to help meet the costs of obtaining a college education. Funding for financial aid programs is provided by the federal government, state governments, colleges and schools, and a variety of other public and private sources. There are two main categories of aid, differentiated primarily by the basis upon which they are awarded:

 Achievement-based aid is awarded to students who have a special characteristic, skill, talent, or ability. Typically achievement-based aid is in the form of scholarships.

 Need-based aid is provided to students who demonstrate financial need. Most financial aid, particularly public-funded aid, is awarded on the basis of financial need determined through the application process and in accordance with a prescribed federal formula.

Financial aid is available in four basic types of programs.

 Scholarships are "gift aid" which does not have to be repaid. Scholarships typically include criteria such as academic performance or special talents.

 Grants are "gift aid" and generally do not include criteria other than financial need.

 Work-study is a "self-help" program in the form of part-time employment during the student's college career.

 Loans are a form of "self-help" since they represent borrowed money that must be paid back over a period of time, typically after the student leaves school.

Student Lending – Code of Conduct

Each CSU campus abides by a Code of Conduct that addresses its relationship with providers of educational loans. Click here to see the Code of Conduct.

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1.2 State of California Financial Aid Programs

The California Student Aid Commission (CSAC) administers a number of student financial aid programs designed to assist California students.

 Middle Class Scholarship (MCS) Provides a scholarship to undergraduate students with a family income of up to $150,000. The student must be enrolled at a California State University or University of California and be a California resident or eligible Assembly Bill 540 student. (On October 12, 2001, Governor Gray Davis signed into law Assembly Bill 540 (Stats.2001, ch 814) that added a new section, 68130.5, to the California Education Code. Section 68130.5 created a new exemption from payment of non-resident tuition for certain nonresident students who have attended high school in California and received a high school diploma or its equivalent.) The student must file a Free Application for Federal Student Aid (FAFSA) or a California Dream Application by the March 2 deadline. Middle Class Scholarships are not a set amount and may vary by student and institution. The award is determined after the student is awarded any Federal aid, State aid and institutional aid for which he is eligible. The final award amount will also be based on the number of students eligible for the MCS state-wide, the amount of tuition fees assessed to the student, and the funding allocated by the State Budget. For more complete information on the program and eligibility requirements, visit http://www.csac.ca.gov/mcs.asp. This scholarship was established in 2013 by California Senate Bill 88. Because of substantial sums the CSU expects to receive in connection with the program and because of the reporting requirements associated with it, a new CSU Fund (425), FNAT key (131090) and revenue object code (503208) were created.

 Cal Grant A Entitlement Awards and Cal Grant B Entitlement Awards Cal Grants A and B provide need-based grant assistance to low- and middle-income full- time students to offset tuition/fee costs and other costs. Recipients must also meet financial and GPA requirements. Funds are first disbursed to eligible undergraduate students, and then requests are submitted to the California Student Aid Commission (CSAC) for reimbursement. If the student limits enrollment to 6.0 units, the Cal Grant must be reduced to the amount of tuition fees. Students must be California residents and be enrolled at least half-time to qualify.

 Cal Grant Community College Transfer Entitlement Awards The Cal Grant Community College Transfer Entitlement Award is given to community college students who do not already have a Cal Grant if they have at least a 2.4 grade point average when transferring to a baccalaureate degree granting institution. Eligible applicants must meet financial criteria, have graduated from high school in 2000-01 or later, and be under the age of 28.

 Competitive Cal Grant Awards The Competitive Cal Grant Award is given to students who do not qualify for one of the entitlement programs. A limited number of Cal Grant awards are currently made available each year on a competitive basis for these students.

 California Chafee Grant The California Chafee Grant is free money for current or former California foster youth to help pay for college or career and technical training. Chafee Grants do not have to be paid back and can be up to $5,000 a year. A Chafee Grant is a federal- and state-funded grant subject to yearly availability of funds. To separate the Chafee Grant from the Cal Grant activity, due to associated reporting requirements, a new FNAT key (131097) with a new project code (CHFEE), and also revenue object code (503207), were created and are valid in CSU Fund 424.

 California Dream Act

The California Dream Act (CDA) is a group of California State laws that allows students who have a California Assembly Bill 540 (AB540) affidavit on file with the CSU campus to apply for state and institutional financial aid. The California Dream Act is not a new financial aid program that contains a revenue or funding source, but rather allows for an additional avenue for students to obtain existing financial aid.

 California Dream Loan Program

Approved by SB 1210, Lara. Postsecondary education: California DREAM Loan Program. The bill provided that, commencing with the 2015–16 academic year, a student attending a participating campus of the California State University may receive a loan, referred to as a DREAM loan, through the program if the student satisfies specified requirements, including requirements established by the California Dream Act, and has a valid AB 540 affidavit on file with their school of attendance. The bill calls for each campus to create a DREAM revolving fund. In this fund, State and institutional money will be deposited to provide the funding required for the loans, as well as loan payments received from students. This program functions similarly to the Federal Perkins Loan Program.

A new CSU fund, 426 (FNAT key 131628), has been created for the California Dream Loan as a loan fund. The funding will come from CSU funds 481 and 485 at the CO. The CO will first transfer the money from CSU funds 481 and 485 at the CO to CSU fund 426 at the CO. The CO will then transfer the money from the CO’s 426 to the campuses’ 426, which means the CO will record the transfer out in 671000 and campuses will record the transfer in in 571000. Campuses will record the loan disbursements in 109001 (Student Loans Receivable) in 426.

These funds (if appropriated) are included as part of the California State Governor’s Budget and are allocated to the CSU. In addition to institutional funds. The CO in turn, provides funding to the various campuses based on need.

For questions regarding the above two sections, campuses should first contact their campus Financial Aid Office for assistance.

2.0 FUND SPECIFICS:

CSU Fund 424, California Grant Programs :

Currently, all state-administered financial aid programs as described above are recorded in CSU fund 424 except for the Middle Class Scholarship recorded in CSU fund 425 and the California Dream Loans, recorded in CSU fund 426

Authority: EC 89721(b) and the Grantor Agreement.

CSU Fund 425, Middle Class Scholarship:

Used to record Middle Class Scholarship, which provides financial support to undergraduate students with a family income of up to $150,000 attending either the CSU or UC. It operates in a very similar way to the Cal Grant Program.

Authority: California Senate Bill 88 (2013)

CSU Fund 426, California Dream Loan:

A revolving fund for the purpose of extending loans to students who meet the requirements established by AB 130/131 and AB 540 and who have financial need. Dream Loans are only available at participating UC/CSU campuses. In this fund, State and institutional money, as well as payments received from students on the loans, will be deposited. The fund will also be used to record the loan disbursements to students.

Authority: CA Senate Bill 1210

3.0 FUND MANAGEMENT AND ACCOUNTING PRACTICES:

3.1 Unique FIRMS Object Codes

109001 – Student Loans Receivable 503204 - Cal Grant Program 503207 – Chafee Grant 503208 – Middle Class Scholarship 609003 - State Grants-Other 670426 – California Dream Loan – Transfers to 426 from another CSU fund in state fund 0948

For a complete list of valid object codes, refer to the Legal Edits Table (see link provided in Section 7.0, Resources).

3.2 FIRMS Edit Table

During the FIRMS data validation process, campus data will be checked to verify that only financial aid object codes are being used in the fund. See Chapter 3, FIRMS, for further information about the Legal Edits Table, which validates combinations of CSU fund and object code.

4.0 REPORTING REQUIREMENTS:

4.1 Reports Annual legislative reports are prepared by the Chancellor’s Office on behalf of the campus for all financial aid-related requests. Campuses may need to provide necessary information to the CO upon request to meet the reporting requirements.

4.2 Chafee Grant

For the Chafee Grant, checks are made payable to the student (and not to the campus) by the California State Controller’s Office, but campuses’ procedures for handling these checks vary. Some campuses ask the student to endorse the check(s) over to the university and then record them on the campus books; others do not record them, but simply hand them over to the students after verifying eligibility. Regardless of the handling of the checks from an accounting standpoint, we have concluded that a sufficient level of administration is being applied by the CSU to warrant reporting of the grant monies on the student’s 1098-T, Box 5. Financial aid is reportable on the 1098-T when the educational institution “administers and processes” payment. This is a fact-based determination. When the campus has a level of involvement in the issue of financial aid to a student (e.g. actively participating in the selection of recipients; determining eligibility before aid is granted), then the activity warrants reporting of that financial aid in Box 5 of the 1098-T.

4.3 California Dream Loan Program

For FY 15-16, the institutional match for the California Dream Loan program will come from the Chancellor’s Office. The CSU will fund CSU Fund 426 using 50% Operating funds and 50% Lottery funds ($1M from each fund for a total of $2M). The CO will centrally transfer the funds and then allocate the funds to the campuses so only the interagency transfer within CSU Fund 426 is needed. The bill allows for the comingling of these funds with a revolving fund, which is the authority that is being cited for the transfers. Earned interest does not need to be returned to

the state. The CO will charge a 5% administration fee and the campuses may do the same to cover costs to administer the program.

The accounting entries for the transfers would be as follows:

LOCATION ENTRY DESCRIPTION ACCOUNT AMOUNT

CO CO Internal transfer from 485 to 426 670426 $1.0M

CO CO Internal Transfer from 481 to 426 670426 $1.0M

CO CO Internal Transfer from 485 to 426 570485 ($1.0M)

CO CO Internal Transfer from 481 to 426 570481 ($1.0M)

CO CO Transfer from 426 to campus 426 671000 $2.0M

Campus CO Transfer from 426 to campus 426 571000 ($2.0M)

Campus Campus disburses funds to students 109001 $2.0M

Campuses will manage the loan program with the loan service provider and the CO will manage the system-wide reporting as follows in accordance with SB1210: (c) (1) Each participating institution shall deposit funds appropriated pursuant to subdivision (a) in a DREAM revolving fund established by each institution, subject to subdivision (e). DREAM loans shall be awarded from, and DREAM loan repayments shall be deposited into, these revolving funds.

(d) At the start of each academic year, before DREAM loans for that academic year are awarded, each participating institution shall contribute discretionary funds into its DREAM revolving fund so that the sum of the institution’s contribution of funds and the institution’s share of DREAM loan repayments equals or exceeds 50 percent of all funds in the institution’s DREAM revolving fund for each year of an institution’s participation. (The CSU is choosing to use Lottery at this time.)

(2) An institution described in paragraph (1) that terminates its participation in the DREAM Program shall annually repay all funds provided by the state as the institution collects DREAM loan repayments (only the appropriated 50% component).

(2) Each institution, including an institution described in subdivision (f), shall annually report all of the following: (A) The total amount of funding in the institution’s DREAM revolving fund. (CO to report) (B) The annual amount contributed by the state to the institution’s DREAM revolving fund. (CO to report) (C) The annual amount contributed by the institution to the institution’s DREAM revolving fund. (CO to report) (D) The annual administrative costs of the DREAM Program at the institution. (Campus to report) 31-7 California State University | CSU Legal Accounting and Reporting Manual FINANCIAL AID - STATE

4.4 Cal Grant Interest Reimbursement For rules regarding Cal Grant interest reminbursement, please refer to the current Institutional Participation Agreement and the CSU Business Process Procedure: Cal Grant Interest Remittance document embedded as a resource in Section 7.0 Resources.

5.0 FUND BALANCE:

For rules regarding remaining funds in Cal Grant, please refer to the current Institutional Participation Agreement and the California Education Code.

FIRMS object code 304021, Designated for Financial Aid, was created for use by campuses that treat summer as a trailer term for financial aid purposes. A trailer term is a term that follows the Spring term, but which does not go into the next academic year. If financial aid has been granted, but was not used by a student for the previous Fall or Spring terms, it can be used in a trailer term. Campuses should accrue on their legal books any unspent amounts that can be used for the summer term before the fiscal year end, and will need to record an entry in the Designated for Financial Aid (304021) to reserve funds that will be expended in the new fiscal year.

6.0 GAAP IMPACT: The FIRMS expense object codes mentioned in section 3.0 map to GAAP account 722003, Scholarships and Fellowships, whereas FIRMS revenue object code 503204, Cal Grant Program, maps to GAAP account 723008, State Financial Aid Grants – Noncapital. In addition, FIRMS object code 109001, Student Loans Receivable, maps to GAAP account 711203, Student Loans Receivable, net.

See GAAP Manual Chapters 4 – GAAP Adjustments and Reclassification Entries for more information on the required GAAP adjustments.

7.0 RESOURCES:

Financial Aid Programs

Legal Edits Table

GAAP Manual

SB 1210 - CA Dream Loan Program

CSU Business Process Procedure: Cal Grant Interest Remittance

SW BPG Cal Grant Interest Calc and Remit - Chpt 31 Final.docx

REVISION CONTROL

Document Title: CHAPTER 31 – FINANCIAL AID - STATE Contributor: Kristina Randig Reviewer: Dean Kulju/Wendy Ortega CO Owner: Roberta McNiel Issuance Date: May 21, 2014

Revision and Approval History

Section(s) Summary of Revisions Revised Reviewed Approve Revision Revised By by d by Date 1.2, 2.0 Updated Information related to the Middle K. Randig R. 1/15/16 Class Scholarship McNiel 1.2, 2.0, 4.2 Added information regarding the California K. Randig D. Kulju,W. R. 1/15/16 Chafee Grant Ortega, S. McNiel John

1.2, 2.0, Added information regarding the California K. Randig D. Kulju, W. R. 1/15/16 4.3, 6.0 Dream Loan Program Ortega, S. McNiel John 3.1 Updated section to remove object codes K. Randig D, Kulju S. John 3/30/17 609005 and 609006 as they are no longer valid in accordance with SFSR’s review of objects and validity within applicable funds. Final email from RM 7/5/16. 5.0 Updated FIRMS Object Code Description K. Randig D. Kulju S. John 3/30/17 4.4 Insterted information regarding the Cal K. Randig D. Kulju S. John 3/30/17 Grant Interest Calculation 7.0 Inserted SW Guideline for Cal Grant K. Randig D. Kulju S. John 3/30/17 Interest Calculation

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