UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 96-4-SP
CHRISTIAN BROTHERS UNIVERSITY, Student Financial Assistance Proceeding
____________________________________ PRCN: 94304229
Appearances: Leigh M. Manasevit, Esq., and Diane L. Vogel, Esq., Brustein & Manasevit, Washington, D.C., for Christian Brothers University.
Sarah L. Wanner, Esq., Office of the General Counsel, United States Department
of Education, Washington, D.C., for Student Financial Assistance Programs.
Before: Judge Richard I. Slippen
On October 20, 1995, the Office of Student Financial Assistance Programs (SFAP) of the U.S. Department of Education (Department) issued a final program review determination (FPRD) finding that CBU violated several regulations promulgated pursuant to Title IV of the Higher Education Act of 1965, as amended (HEA). 20 U.S.C. § 1070 et seq. and 42 U.S.C. § 2751 et seq. The FPRD, which resulted from a June 1994 program review of CBU's Title IV compliance for the award years 1991-92 through 1993-94, contained three unresolved findings. These
findings were that CBU incorrectly certified FFEL loan applicationsSee footnote 2
(Finding # 1); failed to conduct complete verification or failed to resolve conflicting information contained in student files
(Finding # 2); and disbursed Title IV funds to students who were not maintaining satisfactory
academic progress (SAP) (Finding # 4). For these findings, SFAP assessed a liability of $190,995
to the Department and $705,639 to purchase the loans from the current FFEL loan holders.
SFAP based its assessment of liability on full file reviews that CBU conducted in response to the
In its appeal of the FPRD, CBU does not challenge the substance of the findings; rather, it
challenges how SFAP calculated the liabilities for these findings. First, CBU requests that the
actual loss formula or, as it is otherwise known, the estimated loss formula, be used to calculate
its FFEL and Perkins loan liabilities for all three findings. Second, CBU argues that the liability
for the second finding is overstated because Title IV expenditures for nine of the students were
proper. Third, CBU argues that the low error rate evidenced by their nearly complete full file
review for Finding # 2 merits the use of that error rate to assess liability for the remaining 58
unreviewed student files.
would lose, or where there are relatively few liabilities. (Tr. at 39-40). SFAP also identified
satisfactory academic progress violations as a type of violation where it was inappropriate to use
the estimated loss formula since the default rate among these students is likely to be higher than
the institution's cohort default rate which includes all different kinds of students. (Tr. at 40).
Contrary to SFAP's assertions, the estimated loss formula has been proposed by or used
by this tribunal in many of the aforementioned circumstances. Moreover, the estimated loss
formula has been proposed by SFAP and/or used by this tribunal in cases involving violations
similar to the ones at issue in this proceeding. See generally, In Re Hallmark Institute of Technology, Docket No. 94-127-SP, U.S. Dep't of Educ. (August 23, 1995) (The formula was used to calculate the institution's liability for overawards.); In Re Bryant & Stratton Business Institute, Docket No. 94-190-SA, U.S. Dep't of Educ. (September 16, 1996) (SFAP proposed use of the estimated loss formula in a case involving SAP violations.); In Re Chauffeur's Training School, Docket No. 92-113-SP, U.S. Dep't of Educ. (September 4, 1994) (SFAP proposed use of the estimated loss formula for ability-to-benefit violations, incorrect file
verifications, missing financial aid transcripts, disbursements made to students not currently
enrolled, and undocumented adjustments to estimated family contributions.); In Re Knoxville College, Docket No. 94-175-SP, U.S. Dep't of Educ. (July 31, 1995) (The institution was given the option of either purchasing the FFEL loans or reimbursing the Department for its estimated
loss for FFEL loans disbursed without conducting required verifications of student aid reports); In Re Monmouth County Vocational School District, Docket No. 94-144-SP, U.S. Dep't of Educ. (April 25, 1995) (SFAP used the estimated loss formula to calculate the institution's liability for failing to perform the required verification of Title IV eligibility documentation and
failing to perform needs analysis prior to certifying FFEL loans.); In Re Parks College, Docket No. 95-92-SP, U.S. Dep't of Educ. (November 7, 1995) (SFAP had no objection to the use of the
estimated loss formula for failing to adequately document the independent status of students
receiving Title IV aid.) This tribunal also notes that SFAP has opposed the use of the estimated
loss formula in a case involving a Title IV violation similar to FPRD Finding # 2 in this
proceeding. See In Re Fisk University, Docket No. 94-216-SP, U.S. Dep't of Educ. (October 5, 1995) (Due to the relatively small amount and clearly identifiable nature of the FFEL loans, the
tribunal found it unnecessary to apply the estimated loss formula for the institution's failure to
verify student aid applications.)
In a July 17, 1996, memorandum,See footnote 3
SFAP articulated standards governing the use of the estimated loss formula.See footnote 4
SFAP's policy states that the estimated loss formula is to be used in lieu of requiring an institution to repurchase ineligible Stafford or SLS loans. SFAP explains that
although the phrase ineligible loans typically refers to loans made to ineligible borrowers, it can
also mean loans made to eligible borrowers in excess of the permissible amounts. SFAP has also
spelled out specific instances in which the estimated loss formula should not be applied. First, the
formula should not be used in cases where all of the loans are currently in default. Second, the
estimated loss formula should not be used where the borrowers may be eligible for loan relief such
as a false certification or Closed School loan discharge. Third, the formula is not applicable when
student refunds are due. Fourth, estimated loss may be inappropriate where the institution knows
it is certifying ineligible loans. SFAP also identified one situation in which the estimated loss
formula must always be used. In any case that involves a projection from a statistical sample,
SFAP states the formula must be used because it does not know which specific students received
ineligible loans. Therefore, according to SFAP, the estimated loss formula is the only realistic
For cases that do not fit into the specific rules laid out above, SFAP has provided the
following guidance: the formula should not be used in cases involving a small number of ineligible
loans because generalized estimates of default and subsidy costs are significantly less reliable
when dealing with a small number of loans. In cases involving larger number of loans, the
estimated loss formula should be applied since the burden to the institution in identifying and
purchasing all ineligible loans increases as does the burden on the Department to monitor and
enforce the repurchase of the FFEL loans.See footnote 5
SFAP's stated policy is consistent with the tribunal's use of the estimated loss formula in
previous cases. This tribunal has favored use of the estimated loss formula to calculate FFEL
liability. "It makes little sense to require the institution to purchase FFEL loans from the lenders
since the only loss to the Department for the unauthorized loans is interest subsidies, special
allowances, and any sums spent to cover defaults on the loans." In Re Morgan Community College, Docket No. 94-152-SP, U.S. Dep't of Educ. (September 28, 1995).
Federal regulations do not specify how the liability for unauthorized FFEL loans should be
calculated. In Re Parks College at 5. SFAP argues that the use of the formula is completely within its discretion. However, this tribunal has applied it in cases where SFAP has opposed its
use. See In Re Nettleton Junior College, Docket No. 93-29-SP, U.S. Dep't of Educ. (June 8, 1994), In Re Muscular Therapy Institute, Docket No. 94-79-SP, U.S. Dep't of Educ. (July 14, 1995), and In Re Fisk University, Docket No. 94-216-SP, U.S. Dep't of Educ. (October 5, 1995). This tribunal has also held that "an agency's action must be upheld, if at all, on the basis
articulated by the agency itself." In Re Nettleton Junior College at 18 (citing Motor Vehicle Manufacturers Association of U.S. Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 50 (1983)). An "agency must make findings that support its decision, and those findings
must be supported by substantial evidence." Id. (quoting Burlington Truck Lines, Inc. v. U.S., 371 U.S. 168 (1962)). As detailed above, SFAP's use of the estimated loss formula has been
uneven. This tribunal finds SFAP's policy to be a reasonable standard governing the use of the
estimated loss formula. Further, SFAP has already proposed the use of the estimated loss formula
in cases similiar to the one before me. Additionally, SFAP's policy is consistent with prior
decisions of this tribunal. Therefore, SFAP's own standards will be used to determine the
applicability of the estimated loss formula in this proceeding.See footnote 6
SFAP's policy indicates that the formula should not be applied where the borrower is
eligible for loan relief. For FPRD Finding # 1, SFAP first argued that, in cases where a student
has received an overaward, 20 U.S.C. § 1078-7(d)(2) creates a legal obligation to credit the
student's loan account thereby reducing his or her educational loan debt:
If the sum of a disbursement for any student and the other financial aid obtained by such
student exceeds the amount of assistance for which the student is eligible under this
subchapter, the institution such student is attending shall withhold and return to the lender
or escrow agent the portion (or all) of such installment that exceeds such eligible amount,
except that overawards permitted pursuant to section 2753 of Title 42 shall not be
construed to be overawards for purposes of this paragraph. Any portion (or all) of a
disbursement installment which is so returned shall be credited to the borrower's loan and
treated as a prepayment thereon.
In its August 8, 1996, post-hearing submission, SFAP reversed its position concerning overawards. Pursuant to its articulated policy, the estimated loss formula is now to be applied to
overawards.See footnote 7
If, however, the finding had concerned overawards made because an institution charged students for an invalid cost of attendance for which Title IV funds should not have been
used, a different outcome may be required. For example, in cases where students are charged for
an invalid cost of attendance, the students may benefit from a reduction in their educational loan
debt. Therefore, it may not be appropriate to use the estimated loss formula for all cases
involving overawards. However, these circumstances do not exist in the instant proceeding.
Since CBU could collect the overaward amount directly from the students rather than having the
students owe it to their FFEL lenders, the students are not benefitted by the institution
reimbursing the lenders for the amount of the overaward.See footnote 8
Further, this tribunal has already allowed the use of the estimated loss formula in a case involving overawards. See In Re Hallmark Institute of Technology, Docket No. 94-127-SP, U.S. Dep't of Educ. (August 23, 1995). It is clear from the Hallmark decision that the FFEL overawards also resulted from the institution's failure to include other financial aid the students received in calculating the amounts of their FFEL
loans. Id. at 6.
According to SFAP's articulated policy, there is no reason to deny the use of the estimated loss formula for the FFEL liabilities identified in FPRD Findings # 2 and # 4. Further, pursuant to SFAP's guidance, since this case involves a large number of loans, the use of the estimated loss formula is the mandated method to calculate an institution's FFEL loan liability. In the past, SFAP has proposed using the estimated loss formula in cases very similar to the one before me. Although SFAP argues that use of the estimated loss formula will never be "completely standardized," this should not be used as an excuse to deny the use of the formula in clear contradiction of its own policy, as discussed in this decision, and in the absence of a valid
articulated reason.See footnote 9
Therefore, I find that the use of the estimated loss formula is appropriate for the FFEL liabilities in both these findings.
The issue of whether the estimated loss formula may be applied to Perkins loan liabilities
has been brought before this tribunal. SFAP argues that the use of the estimated loss formula is
not permitted as a matter of law and is also impracticable. (Tr. at 37). SFAP argues that the
Perkins Loan Program, a campus-based loan program, in which the funds loaned out by the
institution are Federal monies, is very different from the FFEL program. (Tr. at 37). According
to SFAP, since the institution is the lender under the Perkins Loan Program, there is no difficulty
in getting the "lender" to agree to sell the loan to the institution under a repurchase remedy. (Tr.
at 38). Additionally, SFAP explains that FFEL cohort default rates would not be applicable to
Perkins loans and that there is no reason to assume that Perkins default rates are a reliable
substitute since these rates are not tested by an appeal process. CBU argues that the applicability
of the formula is a question of logic and fairness. (Tr. at 26). CBU admits that there is no
precedent addressing whether or not the formula should be applied to Perkins loans, but argues
that there is no reason not to apply it to Perkins loans. (Tr. at 26).
The estimated loss formula was developed by SFAP as an alternative method to calculate
liability for ineligible FFEL loans. The formula is specifically tailored to calculate SFAP's loss in
default costs and the interest and special allowances (ISA) paid to lenders for improperly
disbursed FFEL loans. In the Perkins Loan program, the institution acts as the lender drawing on
a pool of Federal funds at its disposal. There are no loans made by private lenders that are, in
turn, guaranteed by state guaranty agencies, and, ultimately by the Federal government. Simply
put, the estimated loss formula does not, in any respect, contemplate the loss to SFAP from
improperly disbursed Perkins loans. Since the Perkins loan fund is composed entirely of Federal
monies, reimbursement of the fund is the only way to make the Department whole. Further,
federal regulation specifies that an institution reimburse the Perkins loan fund for ineligible
overawards. 34 C.F.R. § 674.13(a)(1) (1991). As such, I find that SFAP's existing estimated
loss formula is not applicable to Perkins loan liabilities.
The parties have argued over which cohort default rate should be used to calculate the estimated loss liability: an average of several cohort default rates, the cohort default rates
spanning the program review period, or the most recent cohort default rate. SFAP states that in
this and any future case, it will use the rates applicable to the period under review, if final, or, if
not, the most recent cohort default rate. To this end, SFAP used the FY 1992 cohort default rate
for the FFEL loans made during the 1991-92 award year and the FY 1993 cohort default rate for
the FFEL loans made during the 1992-93 and 1993-1994 award years. At oral argument, SFAP
also argued that an institution's pre-publication default rate should never be used because it is not
a final rate. (Tr. at 41). CBU asks that an average of the institution's cohort default rates from
fiscal year (FY) 1989 through FY 1993 be used.See footnote 10
In prior cases, this tribunal has used both a single cohort default rate and an average of
several cohort default rates to calculate estimated loss liability. In utilizing either of these two
approaches, this tribunal has endeavored to use the best available evidence to determine SFAP's
loss. As stated by CBU, very few of the students at issue in the FPRD have yet to enter
repayment on their FFEL loans. (Tr. at 48). The use of any past cohort default rate(s) to
estimate future defaults is, therefore, necessarily speculative. SFAP's stated policy on which
cohort default rate to apply is reasonable. The policy connects the estimated loss liability with the
program review period or, if a cohort default rate has yet to be issued for the program review
period, the most recent rate. This tribunal does not intend to continue muddying the waters by
creating a hybrid or "average" default rate based on several years of cohort default rates. CBU's
proposal that this tribunal use cohort default rates going back to the institution's FY 1989 cohort
default rate is also rejected because CBU's older rates are too remote from the program review
period. Therefore, since SFAP's policy regarding which cohort default rates to use in calculating
the estimated loss formula is reasonable, this tribunal will follow SFAP's stated policy.
Another dispute concerning estimated loss liability is the calculation of the ISA the
Department pays to lenders for subsidized Stafford loans. The Department is required to make
interest subsidy payments until the borrower enters repayment while the special allowance
payments continue over the life of the loan . 20 U.S.C. §§ 1077(a)(g)(2), 1078(a)(3)(A)(i), 1087-
1(b)(2)(E) (1991). These ISA payments are intended to compensate lenders for their loss of
interest payments during the period when payments from subsidized borrowers are deferred and
to ensure a reasonable rate of return on these loans. In Re Student Loan Marketing Association (Sallie Mae), Docket No. 96-23-SL, U.S. Dep't of Educ. (September 26, 1996) at 4. SFAP argues that, in order to fairly compensate SFAP for its loss, the ISA should be calculated utilizing
the steps contained in the estimated loss worksheet. CBU claims that SFAP should only be
allowed to claim the ISA liability identified in the FPRD since CBU had no notice of any
additional ISA amounts now claimed by SFAP. CBU asserts that this tribunal has, in the past,
calculated the estimated default costs and simply added the ISA identified in the FPRD or that it
did not add ISA costs at all.
The estimated loss formula is intended to calculate the Department's estimated payments
in interest subsidies and special allowances for the life of the ineligible subsidized Stafford loans.See footnote 11
Since SFAP proposed a repurchase remedy for the ineligible FFEL loans in the FPRD, it totaled
the ISA in accordance with the repurchase of the loans. These ISA figures listed in the FPRD do
not correspond to the ISA the Department spends on loans that are not repurchased. Thus, the
FPRD's ISA figures should not be used since estimated loss will be used to calculate CBU's
liability.See footnote 12
CBU's argument that it was not given notice of the increased ISA costs when it requests use of the formula is categorically rejected. If CBU wishes the formula to be applied, it
must accept that the ISA will be calculated in conformance with the estimated loss formula. CBU
cannot pick and choose among the parts of the formula it finds the most beneficial. If the
estimated loss formula is used, it must be used in its entirety. Thus, if SFAP's remedy changes
from repurchase to estimated loss, it will necessitate changes in the ISA calculated in the FPRD.
Moreover, an analysis of the worksheet reveals that if the default rate which this tribunal uses to
calculate estimated loss changes, the calculation of ISA in Steps 4a and 4b of the estimated loss
worksheet should also change. Therefore, even if SFAP proposes use of the formula in the FPRD
and calculates the ISA liability accordingly, these ISA figures must be adjusted if the tribunal
determines that an alternate default rate should be used.See footnote 13
An institution may withhold certification of the applicant's FFEL loan application or it may certify
the loan application provided that it does not process the loan proceeds. 34 C.F.R.
§ 668.58(a)(2)(iii)(A) and (B) (1991). If the applicant does not complete the verification process within 45 days, the institution must return the loan proceeds to the lender. 34 C.F.R. § 668.58(c) (1991).
In FPRD Finding # 2, for the students listed in Appendix D, SFAP assessed liability for
Pell Grant overawards because the applications for these students appeared to be accurate. For
the students listed in Appendix E whose applications did not appear accurate, SFAP assessed
liability for all Title IV funds awarded to these students. SFAP argues that its measure of liability
is consistent with federal regulations. SFAP further argues that it is often impossible to determine
how much aid a student would have received had the student provided complete and correct
information. Also, SFAP asserts that if institutions were only held liable for overawards for
students whose applications were facially inaccurate, there would be no incentive for institutions
to identify and resolve inaccuracies.
CBU presents numerous arguments as to why the liability is overstated for Finding # 2. First, CBU argues that the liability should be reduced to reflect the additional information that reveals that Title IV funds were properly disbursed to eight students and a difference of only $50.00 exists for a ninth student.See footnote 14 14 Second, CBU argues that since SFAP did not assess liability for SEOG or FFEL loan funds for the students listed in Appendix D, SFAP should not be allowed to claim liability for these funds for the Appendix E students. Third, CBU argues that it should be able to use a 27 percent error rate developed from CBU's reverification process of the students listed in Appendix D to calculate the liability for the Appendix E students. Thus, SFAP should only be able to claim the Pell Grant decreases that would have been likely if verification had been complete for the 58 remaining students in Appendix E. Fourth, CBU argues that it was not legally obligated to conduct a full file review since it is only required to verify 30 percent of its student files. According to CBU, the students listed in Appendix E were above the 30 percent limit. Therefore, CBU cannot be held liable for these students.
Subpart H proceedings were intended to assess liability when an institution misused funds. This tribunal has held that there must be some harm to SFAP in order to assess liability. In Re Macomb Community College, U.S. Dep't of Educ., 91-80-SP, (May 5, 1993) at 7; In Re Chicago State University, Docket No. 94-172-SA, U.S. Dep't of Educ. (April 26, 1996) at 5. In In Re Chicago State University, this tribunal reduced the liability for the students the institution was able to demonstrate were eligible to receive Title IV funds despite financial aid folders that previously contained missing or incomplete information. Id. at 5. CBU submitted evidence that
Title IV funds were properly disbursed to nine students. SFAP did not challenge the substance of
this evidence, it merely argued that CBU's reverifications come too late and that this late evidence
does not demonstrate that these students' files were reviewed at the time of disbursement.
SFAP's argument is, at best, specious. The nature of this proceeding is to assess liability for
actual harm. CBU has demonstrated that no harm occurred as to these nine students. Therefore,
I find that CBU has met its burden under 34 C.F.R. § 668.116(d) in demonstrating that Title IV
funds were properly disbursed to these nine students.See footnote 15
CBU's argument that only Pell funds should be recoverable for the students listed in
Appendix E since SFAP only sought repayment of the Pell funds for the Appendix D students is
without foundation. It is clear that the Department is entitled to assess liability for all Title IV
funds when an institution disburses funds to students whose student aid applications are facially
inaccurate. 34 C.F.R. § 668.58 (1991). Therefore, liability may be assessed for all Title IV aid
disbursed to the 58 students at issue in Appendix E.
In a Subpart H proceeding, it is the institution's burden to prove that Title IV funds were
properly disbursed. 34 C.F.R. § 668.116(d). Over the course of one year, CBU reviewed almost
2000 files and hired an accounting firm to validate and verify its work. (Tr. at 5-6). CBU argues
that in reviewing such a large number of student files and in seeing a consistent pattern where
verification reflects a very low error rate, it is reasonable to assume that this error rate is a close
estimate of what errors would be found in the unverified files. For reasons unknown to this
tribunal, SFAP set a June 21, 1995, completion date for the institution's full file review. By this
date, CBU had completed verification of all but 67 student files. Subsequent to the June 21,
1995, cutoff date set by SFAP, CBU completed verification for nine additional students, leaving
only 58 unreviewed files. (Tr. at 14). CBU submitted evidence for these nine students which has
been accepted by this tribunal. CBU stated that if given additional time, many more of the
remaining file reviews would have been completed.
In its brief, CBU correctly argued that the nature of this proceeding allows for the
acceptance of evidence, demonstrating that Title IV funds were properly expended, at almost any
stage in the process. Therefore, I must question why CBU did not complete the review of the
remaining files and submit evidence to SFAP and/or this tribunal regarding the appropriateness of
its expenditure of Title IV funds to these 58 students. If CBU had demonstrated that some or all
of its expenditures for the 58 students were proper, as it did for the nine students, this tribunal
would have further reduced CBU's liability. Since CBU did not submit evidence regarding these
58 remaining students, I find that CBU has failed to meet its burden of proof under 34 C.F.R.
Pursuant to Section 484(f) of the HEA, the Department cannot require an institution to verify more than 30 percent of the total number of its students who apply for Title IV financial aid
in a given award year.See footnote 16
20 U.S.C. § 1091(f) (1991). Institutions that participate in the Title IV programs may be required to verify student applicant financial aid information. This verification
must be performed when the Secretary of Education directs that random student files be verified,
or because the student application contains incorrect, missing, illogical, or inconsistent
information. 34 C.F.R. §§ 668.54, 668.56 (1991). SFAP states that the 30 percent limitation
only applies if, and when, the verifications were performed before disbursement.
CBU argues that it owes no liability for the students listed in Appendix E because it is not
obligated to verify more than 30 percent of its files and these students are above the 30 percent
limit. CBU points to an affidavit given by Mr. James Shannon, Director of Student Financial
Resources at CBU. In his affidavit, Mr. Shannon stated that he "oversaw and directed the full file
review and reconstruction for the ... 1991-92, 1992-93, and 1993-94 [award years]." (Resp. Ex.
4 at 1). Mr. Shannon also stated the full file review revealed that 827 students had been selected
for verification over the program review period. (Resp. Ex. 4 at 2).
Although SFAP is prohibited from requiring that an institution verify more than 30 percent
of its financial aid applicants for an award year, in a Subpart H proceeding, the institution must
still demonstrate that it actually verified at least 30 percent of its applicants. In Re Fisk University at 4. In In Re Fisk University, the institution submitted evidence that satisfied the tribunal that it verified at least 30 percent of its students during the award years at issue. Id. CBU admits that the administration changed after the program review period and that the new administration,
including Mr. Shannon, had no personal knowledge regarding whether this verification occurred.
CBU has further admitted that its unfamiliarity with which student files were verified before Title
IV funds were disbursed was one of the reasons they undertook such a comprehensive and
exacting file review. Given his admitted lack of personal knowledge and unfamiliarity with what
files were reviewed, Mr. Shannon's statement that at least 30 percent of the files were reviewed
before Title IV funds were disbursed, is unpersuasive. I find that CBU has not satisfied its burden
of proving that it verified at least 30 percent of its Title IV applicants during the award years in
question. As a result, CBU remains liable for the Title IV funds disbursed to the 58 remaining
students listed in Appendix E.
2. The estimated loss formula will be used to calculate CBU's FFEL and PLUS loan liabilities for
FPRD Findings # 1, # 2, and # 4. CBU's liability under the estimated loss formula for all FFEL
and PLUS loans is $246,602.See footnote 17
3. CBU has met its burden in proving that Title IV funds were properly disbursed to nine of the
students listed in FPRD Finding # 2.
4. CBU remains liable for the Title IV funds disbursed to the 58 unverified students listed in
Appendix E of FPRD Finding # 2.
Judge Richard I. Slippen
Dated: January 8, 1997
The following tables illustrate each step in the estimated loss calculation.See footnote 18
In Step 2, the institution's cohort default rate is multiplied against the total amount of ineligible Stafford and
SLS loans disbursed during the period at issue. This calculation yields the estimated loss in Title
IV disbursements resulting from students defaulting on repayment of an ineligible loan. In Step 3,
the amount of ineligible Stafford loans is multiplied against the daily ISA factor determined by
SFAP.See footnote 19
This number is multiplied against the average number of days the Department paid loan subsidies to lenders (from disbursement to repayment for 4-year public and private institutions).
This calculation is similiarly used under Steps 4a and 4b to determine the special allowance
amounts paid to lenders by the Department. Under Step 5, the amounts indicated in the last
column of each table are added together to yield the institution's total estimated loss liability.
STEP 2: Estimated Defaults
|FFEL Loan Liabilities||Amount of Ineligible Loans||Cohort Default Rate||Estimated Loss from Defaults|
|SLS, Unsubsidized Stafford loans, and PLUS loans||$25,119||11.1%||$2,788|
|Ineligible Subsidized Stafford Loans||Daily ISA Factor||Average Number of Days||Total Subsidy|
STEP 4a: Estimated Special Allowance Paid to Lenders from Disbursement to Repayment
|Ineligible Subsidized Stafford Loans||Cohort Default Rate||Daily ISA Factor||Average Number of Days||Total Allowance|
STEP 4b: Estimated Special Allowance from Repayment to Paid In Full (PIF)
|Ineligible Subsidized Stafford Loans Minus Estimated Loss in Step 2||One-half the Result of the Previous Column||Daily Special Allowance Factor||Average Number of Days||Total Allowance|
|Estimated Loss||Subsidies Paid||Special Allowance||PIF||Total Estimated Loss Liability|
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Leigh M. Manasevit, Esq.
Diane L. Vogel, Esq.
Brustein & Manasevit
3105 South Street, N.W.
Washington, D.C. 20007
Sarah L. Wanner, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110