In the Matter
UNIVERSITY, Student Financial
Respondent. PRCN: 90104028
Appearances: William A. Blakey, Esq., Clohan & Dean,
Washington, D.C., for Clark Atlanta University.
Steven Z. Finley, Esq., Office of the
General Counsel, United States Department
of Education, Washington, D.C., for Student Financial Assistance Programs.
Before: Judge Ernest C. Canellos
Clark Atlanta University is an institution of higher education located in Atlanta, Georgia. The institution was formed in 1989 as a result of a merger between two historically black institutions -- Clark College, an undergraduate liberal arts college, and Atlanta University, an institution that offered only graduate-level programs. On December 11-15, 1989, SFAP's program reviewers from the Department's Regional Institution Review Branch located in
Atlanta, Georgia conducted a program review of Atlanta University's Federally funded student
financial aid programs. The program review included a review of a sample of 31 student files
which Title IV financial assistance was awarded to students during the 1987-88 and 1988-89
award years. On June 25, 1990, SFAP issued a program review report that contained 20 findings
concluding that CAU was in noncompliance with Title IV regulations. Six of the findings from
the program review were not resolved by SFAP and CAU and, as a result, became the basis of
final program review determination requiring the institution to repay ED Title IV program
liabilities totaling $759,216.55.
In this proceeding, CAU's request for review of the FPRD is
limited to Finding #5.See footnote 1
Under Finding #5, SFAP argues that CAU, in violation of 34 C.F.R. § 668.7(a)(7),
disbursed Title IV funds to students who had already defaulted on repayment of a Title IV loan,
yet had not presented documentation to the institution that the defaulted loans had been repaid or
were in satisfactory repayment. Therefore, the only disputed issue before me is whether CAU
disbursed Title IV funds to ineligible students in contravention of Section 668.7(a)(7).
According to SFAP, the Department's program reviewers
discovered that 2 of the 31
student files examined revealed that CAU had made Title IV funds available to 2 students who
were in default on Title IV loans received from other institutions. On this basis, SFAP instructed
CAU to review the files of all students enrolled during the 1987-88 and 1988-89 award years to
identify whether other students, who were in default, had been improperly awarded Title IV
funds. CAU examined its own records and identified students who had received Title IV funds,
but were in default on a previously obtained Title IV loan. SFAP's review of this information
resulted in its conclusion, under Finding #5 of the FPRD, that CAU improperly disbursed Title
funds to its students during the 1987-88 and 1988-89 award years and, as a result, owes liabilities
of $91,395.55 in Federal work-study funds, $81, 848.00 in Federal Perkins loan funds, and
$411,183.00 in estimated losses for improper disbursements of Federal guaranteed student loan
funds. When added to the liabilities which CAU does not dispute, the total amount sought by
SFAP in this proceeding is $759,216.55.
Under Title IV program regulations, institutions eligible to receive Title IV funds may disburse those funds only to students who are eligible to receive student financial assistance under Title IV. In that regard, 34 C.F.R. § 668.7(a)(7) prescribes that a student is eligible for financial assistance under Title IV if, inter alia, the student is not in default, and certifies that he or she is not in default, on any loan made under Title IV. In addition, a student who is in default on a Title
IV loan may still be considered eligible to participate in Title IV programs if the student presents
the institution with documentation showing that the defaulted loan either has been paid in full or
that the student has made satisfactory arrangements to repay the loan.See footnote 2
CAU argues that as a result of a series of amendments to Title IV
over the course of the
period at issue, institutions were unaware of what type of documentation was required to
maintain compliance with Title IV's record keeping requirements. In this respect, CAU contends
that although Title IV undisputedly required institutions to obtain documentation to verify a
student's Title IV eligibility, the type of documentation required was so ill-defined by statute and
regulation that CAU, in its former form, was hindered in its ability to obtain more appropriate
documentation. In support of its position, CAU contends that a preliminary file reconstruction
conducted by the institution demonstrated that at least 39 student files contained what could be
deemed proper documentation which supported the institution's determination that its students
were eligible for Title IV assistance.
In its opening brief, submitted to the tribunal on February 7, 1994, CAU contended that "within the next two weeks" a file reconstruction would be completed. In CAU's February 14, 1994 submission,See footnote 3 3 the institution requested that it be granted leave to file documentary evidence supporting its position notwithstanding the fact that under 34 C.F.R. §§ 668.113(b) and 668.116(e)(2) the time for filing documentary evidence had expired.See footnote 4 4 In the interest of fairness and equity, and in light of CAU's contention that it had reconstructed its files covering the years at issue, on October 31, 1994, I granted CAU leave to submit evidence supporting its position.See footnote 5 5 My order required CAU to file its submission on or before November 10, 1994. To date, CAU has not submitted any evidence supporting its position. Accordingly, irrespective of the merits of
CAU's legal arguments, I must find that the institution cannot prevail in this proceeding because
CAU has failed to meet its burden of proof.See
Nor am I persuaded by CAU's legal argument. Despite the fact that
Title IV has
undergone several amendments, the statutory provision precluding disbursement of Title IV
to students who default on a student loan has remained unchanged. The HEA, under Section
484(a), prohibits students from receiving Title IV loans if they are in default on any Title IV loan
disbursed by any postsecondary institution unless the defaulted loan was repaid or is in
satisfactory repayment. See, § 484(a), 20 U.S.C. § 1091(a). Similarly, Title
IV regulations throughout the period at issue prohibit institutions from disbursing Title IV funds
to students once
it receive a financial aid transcript which indicates that the student is in default on any Title IV
loan. See, e.g., 34 C.F.R. § 668.19 (1990). Section 668.19 is abundantly clear that
an institution that certifies a Title IV loan application must return to the lender any funds
it disburses to the student if the institution receives a financial aid transcript indicating that the
student defaulted on
a Title IV loan. In addition, the unambiguous language of Section 668.19 prohibits institutions
from disbursing more than one Pell Grant payment to students if institutions do not obtain
appropriate financial aid transcripts.
More important, to the extent that CAU contends that despite the clear language of the regulations referred to supra, the statute was nonetheless unclear whether institutions were only prohibited from improperly "certifying" student loan applications or were actually prohibited from improperly "certifying" or "disbursing" loan funds to students, this is a distinction without a difference under the circumstances of this case. Simply stated, CAU did not submit any evidence to this tribunal accounting for its disbursement of Title IV funds. Consequently, there is no evidence in the record for me to review to determine whether the distinction it now offers as pertinent to its position is actually relevant to its administration of the Title IV program during the 1987-88 or 1988-89 award years. Unmistakably, in a proceeding adjudicating the merits of SFAP's determination that an institution owes the Federal government a substantial amount of money, if the institution had not actually disbursed the funds at issue, but, instead, had merely certified that its students were eligible for Title IV assistance, the record would be abounding with evidence showing that the institution had not disbursed Federal funds contrary to Title IV
requirements. Here, this is not the case. The institution introduced no evidence supporting its
After a review of the FPRD, I am convinced that
the findings contained therein sufficiently state allegations in a manner that would require CAU
to carry its burden of proof.
In that regard, I find that CAU failed to
carry its burden of proof in
establishing that the institution did not
disburse Title IV funds to
ineligible students or that
the institution's expenditures of
Title IV funds were otherwise proper.
Judge Ernest C. Canellos
Dated: December 11, 1995
A copy of the attached document was sent to the following:
William A. Blakey, Esq.
Clohan & Dean
1101 Vermont Avenue, S.W.
Washington, D.C. 20005
Steven Z. Finley, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110