2807.02  COLLECTION OF OVERAWARDS


If the overaward cannot be eliminated in the award year by adjusting 
subsequent disbursements, the institution must make arrangements to have 
the student repay any funds not recovered through refunds "within a 
reasonable period of time."  The institution may choose to designate "within 
the award year" as a reasonable period.


Repayment incentives are limited by the lack of authority to use collection 
agencies or to assess interest or penalty charges. The institution may, 
however, withhold both financial aid transcripts (for default on Title IV 
funds and Pell only) and academic transcripts/other services.  The authority 
for this rests in 34ÊC.F.R.Ê668.14(c) and Title 5, Section 42381, California 
Administrative Code.  Additional Title IV assistance must be withheld until 
the overaward has been repaid or satisfactory arrangements have been made.


In addition to withholding services and further aid, the institution may 
initiate small claims court proceedings to recover overawards.  The chances of 
success may be diminished in such a proceeding if the overaward 
occurred due to institutional error and/or a substantial period of time elapses 
(e.g., one year or more) prior to discovery of the overaward and subsequent 
notification of the student.  If the institution does prevail in the 
proceeding, the court may award the attendant costs as part of the judgment.  
If the institution does not prevail, costs incurred in filing the suit or costs 
awarded to the defendant are not chargeable to Title IV funds other than 
NDSL.