Third Party Servicers
Schools sometimes elect to contract out the performance of certain administrative functions. Such an arrangement may be temporary (for example, due to a loss of personnel) or ongoing where outside expertise and resources are deemed more efficient. In any case, the institution retains the responsibility for proper Title IV administration, and is held jointly or severally liable for any compliance exceptions. Regulations identify the functions that may be performed by a third party servicer, and define when performance of certain functions constitute third party status.
Related topics in this Index: Administrative Capability; Cash Management; Financial Responsibility of Institutions
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Statutory Authority
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Regulations
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ED References
See also Subtopics for more specific references.
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NASFAA Publications and Articles
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NASFAA AskRegs Knowledgebase
Search or browse the Knowledgebase for answers to regulatory and compliance questions submitted by financial aid administrators.
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Subtopics
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Applicability of Title IV rules to third-party servicers
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Arrangements with third-party servicers
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Direct marketing
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Disclosure
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Requirements
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Student choice
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Student consent
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Tier One (T1) arrangement
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Tier Two (T2) arrangement
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Audits
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Billing and collection of Perkins loans
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General rule
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Fidelity bond or comparable insurance requirements
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Contracts between an institution and a third-party servicer
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General rule
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Changes to institution’s third-party servicers
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Termination of contract
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Default Reduction Assistance Program (DRAP) for Perkins loans
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Disbursement functions
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General
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Checking student’s eligibility at time of disbursement
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Student access to Title IV balances
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Exit interviews for Perkins loans
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FERPA Rules
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Impact on administrative capability requirement to use adequate number of aid administrators
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Notification (to ED) requirements
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Prohibited contracts due to past actions
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General rules
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Financial responsibility implications
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Referral of suspected illegal activity to OIG
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Responsibility for compliance
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General rules
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Liability for improperly spent funds
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Penalties for noncompliance
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Third-party servicer (definition)
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Definition
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Excluded functions
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Included functions
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Treatment of institutional employees
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Written arrangements between institutions