In the Matter of
Colorado School of Travel,
Docket No. 94-174-SP
Lakewood, Colorado, Student Financial Assistance Proceeding
Appearances: Jeff C. Heller, Director of Education, Colorado School of Travel, Lakewood,
Colorado, for Respondent.
Howard D. Sorensen, Esq., Office of
the General Counsel, U.S. Department of
Education, Washington, D.C., for the
Student Financial Assistance Programs.
Before: Frank K. Krueger, Jr., Administrative Judge.
The Respondent's academic program consisted of thirty weeks, for a total of thirty-six credit hours. The Respondent's program is not divided into academic terms, such as quarters or semesters. Under such programs, authorized Pell Grant and FFEL payments are made in two
installments -- the first at the beginning of the academic program, and the second at the midpoint
of the program. The Respondent made second payments to five students by measuring the
midpoint in terms of the calendar time, and not in terms of credit hours. It appears that the
payments were made when the students completed fifteen weeks of the thirty-week program, and
not upon completion of eighteen credit hours of the thirty-six credit hour program.See footnote 1
The students then dropped out of the program before completion of the eighteen credit
hours. As a result,
SFAP assessed liability to the Respondent for the amount of the second disbursements.
It is SFAP's contention that the midpoint must be measured in
terms of credit hours;
Respondent contends that the midpoint can be measured in terms of calendar time. For the
reasons provided below, the hearing official finds for SFAP with respect to the Pell Grant
Program, and for the Respondent with respect to the FFEL Program.
the period in which the student completes the second half of an academic year.See footnote 2
Under 34 C.F.R. § 690.63(c), a disbursement for each of these periods cannot exceed
a certain amount of the total
grant, which, in the case of the Respondent, comes out to one-half of the total grant.See footnote 3
Under 34 C.F.R. § 690.75(a)(3)(ii), for each payment period, a student may not
receive a disbursement until
the student completes the required credit hours covered by the payment period for which the
student already received a disbursement.
In the case of a school such as Respondent, which does not measure its program in academic terms, the first disbursement is made at the beginning of the academic program, with the second disbursement made only after the student has completed one-half of his or her credit hours. Thus, a student participating in Respondent's thirty-week program could not receive the second payment until after the student completed eighteen credit hours. By issuing students the second disbursement of their Pell Grants after the completion of fifteen weeks of the program, but before the completion of eighteen credit hours, Respondent was in violation of the regulatory requirement outlined above. Thus, SFAP was correct in its assessment of liability of Respondent to reimburse ED for the second disbursements issued prior to completion of eighteen credit hours. SFAP determined this amount to be $4,700. This calculation was not challenged by Respondent.
Thus, Respondent is liable to repay $4,700 to ED.
Respondent argues that 34 C.F.R. § 668.22 supports its
position that the midpoint of an
academic program can be determined on a calendar basis, rather than a credit hour basis.
However, as SFAP points out in its brief, this section is inapposite, in that it deals with the
distribution of refunds among the various aid sources after a student withdraws from an
Respondent also argues that the recently adopted revision of the
definition of payment
period in 34 C.F.R. § 690.3, effective July 1, 1995, supports its position. However, again
noted in the SFAP brief, this revision does not support Respondent's position, in that the new
definition simply provides that the second payment period can begin no earlier than the
chronological midpoint, even if one-half of the program credits have been earned. For example,
Respondent's program, a student would not be eligible for the second Pell Grant disbursement
even if the student had completed eighteen credit hours of course work, if less then fifteen weeks
had expired in the duration of the program.
34 C.F.R. § 682.207(c) provides as follows:
A lender shall disburse any Stafford or SLS loan, as follows:
(1) Disbursement must be made in two or more payments.
(2) No installment may exceed one-half of the loan.
(3) At least one-half of the period of enrollment for which the loan is made must elapse before the second installment is disbursed. . . . [Emphasis added.]
Since "one-half of the period of enrollment" is not defined, Respondent's implementation in terms of chronological time is as legally justifiable as SFAP's interpretation in terms of credit hours.
The regulation is vague and is subject to both interpretations.See footnote 5
Thus, Respondent has no liability for improperly disbursing funds under the FFEL
Issued: June 14,
Washington, D.C. Frank K. Krueger, Jr.
S E R V I C E
Howard D. Sorensen, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Ave., S.W.
Washington, D.C. 20202-8302
The [Respondent's]financial aid director revealed it was standard
procedure to include, in the mid-point credit hour determination,
estimated credit hours based upon elapsed calendar time and not on
18 actual credit hours completed.
This cryptic characterization of Respondent's action is made in a number of other documents shared between SFAP and the Respondent, and was never challenged by the Respondent. Since this was never represented as a direct quotation, and since it is a statement made by SFAP, the hearing official construed it in a light most favorable to the Respondent as a determination of the midpoint as the middle of the program in terms of calendar time. If the determination was at a point in time before the calendar midpoint and before the completion of eighteen credit hours, the determination would have clearly been a violation of the regulations. It is clear, however, that Respondent's legal argument is that the midpoint can be determined at the calendar midpoint of the program. See Respondent's Exhibits 2 and 3. Thus, the undersigned has construed the above- quoted factual allegation by SFAP in a manner consistent with Respondent's legal argument.
Both sections apply to programs without academic terms, but
section (b)(1) applies to a
program which is one "academic year," while section (b)(3) applies to a program less than an
"academic year." The confusion arises over the meaning of "academic year," which is defined,
34 C.F.R. § 668.2 as follows:
Academic year: . . . is a minimum of 30 weeks . . of
instructional time during which . . . a full time student is expected
to complete at least --
(I) Twenty-four semester or trimester hours or 36 quarter hours in an educational program whose length is measured in credit hours; . . . .
Although Respondent's program is thirty weeks in length, the term "quarter hour" is not defined, so one cannot tell whether Respondent's program is more or less than an academic year. But, under both sections of the regulations, it is clear that the second disbursement should not have been made until students completed eighteen credit hours.