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Scope

This policy applies to all individuals at the °ÄÃÅÁùºÏ²Ê¹ÙÍø¿ª½± who process, review, or approve student account refunds.

Reason for Policy

To ensure compliance with all applicable federal regulations and University policies regarding the processing, approval, and issuance of student account refunds. 

Policy Statement

The U.S. Department of Education provides guidance regarding when a financial aid refund should occur, how it is to be delivered, and to whom.  Each campus cashier’s office is responsible for working with their respective financial aid office to ensure compliance with the most current Department of Education guidelines for issuing financial aid refunds from a student account.

A credit balance on a student account may be the result of the following activities: financial aid paid in excess of what the student owes, a student drop or withdrawal, or a cost center refund such as a refund of library fines.  A refund to the student (or a parent in case of a parent loan) are the only ways to disperse funds from the student account.  It is imperative that appropriate monitoring occur and segregation of duties be maintained when processing a refund.

Refunds resulting from excess financial aid are to be processed daily while exception refunds (e.g. drop in hours, withdrawals) are to be processed no less than weekly during peak refund periods.  Refunds resulting from the posting of Title IV Federal Student Aid (Pell, SEOG, Federal Direct and Perkins loans) must be issued within timeframes as required by federal regulations.  

All refund transactions are subject to review to ensure the accuracy and appropriateness of the refund.  This is a managerial level control that provides assurance as to the functioning of the system and the various review processes that take place.  An administrative superior over the refund process or their designee must review all refund transactions in excess of $10,000.  The review is documented by the cashier’s office upon signing off on the refund list report after it has been reviewed.

To ensure compliance with IRS regulations, the appropriate campus office must review refund transactions to students who are not U.S. citizens before releasing them for payment.  Those students categorized as nonresident aliens for tax purposes may be subject to federal tax withholding and reporting requirements. 

Definitions

Nonresident Alien (NRA) for tax purposes - an individual who is not a U.S. citizen and does not meet a tax law residency test.

Title IV Federal Student Aid - federal student aid funds administered by the U.S. Department of Education.  Title IV funds include Direct Subsidized/Unsubsidized Loans, Direct Graduate PLUS Loans, Direct PLUS Loans, Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (SEOG), and Federal Perkins Loans.

Accountabilities

Payroll Office:

• Process federal tax withholdings as required for student account refunds to NRA students.

Campus Cashier’s Office:

• Manage the student account refunding process and comply with applicable regulations.
• Document a periodic review of student account refunds to ensure their continued appropriateness.
• Verify the appropriateness of refunds and alert appropriate offices of errors or suspicious activities.
• Review refunds to nonresident aliens:
  
  • Refer to campus NRA Tax Specialist concerning the taxability of refund
  • Ensure appropriate amount of refund is posted to student account

Campus NRA Tax Specialist:

• Review NRA refunds to students for taxable status.
• Advise Cashier’s office of taxability of refund transactions.
• Follow up with campus and system payroll offices regarding necessary tax withholdings

Additional Details

Forms

Related Information

IRS:

UM System Treasurer’s Office: Credit Card Refunds

History

Formerly Accounting Policy Manual 65.30 – Tuition and Fee Refunds (revised 6/12/2008)

Procedure