Dear Mr. Ethics,
We release federal funds to our bookstore for students to use for books and supplies for the upcoming term. Unfortunately, we find that students are using those monies to purchase soda pop, candy, snacks, clothing, songs on iTunes, electronics like expensive headphones, and other items that we aren’t sure qualify as educational expenses. Our school’s policy states that funds are to be used for the student’s educational expenses, but our bookstore has no procedure to monitor purchases. Should we be concerned?
Banish Bookstore Buffoonery
Yes, there could be some reasons for concern. Your school’s policy of restricting aid funds to educational expenses reflects federal requirements. First, students must sign a statement of educational purpose as a condition of Title IV aid eligibility, agreeing to use federal and state student aid only for educational costs. Second, the cost of attendance (student budget) used to award aid is based upon the student’s educational expenses only. But while the school has control over budget construction, it has limited control over student spending, so what are the implications of these requirements?
First of all, there is no federal requirement to monitor student purchases or use of aid funds. In fact, a general principle is that all dollars are green—a student’s cash resources might come from a mix of federal aid, state aid, private aid, family contribution, or non-need-based employment, but dollars are not tagged and tracked.
Further, your question about what constitutes educational expenses highlights a potentially gray area. Budgets do in fact allow for miscellaneous expenses (which could include a T-shirt), food outside of a meal plan (candy and soda pop might be a bad diet but you’re not the student’s doctor), and limited entertainment (maybe that could include iTunes and headphone purchases). Bear in mind also that some purchases might be outside of educational expenses for some students, but related to an academic program for another student. If the student is a music major, for example, a good quality set of reasonably priced headphones might be a justifiable piece of equipment for the student’s academic program.
That said, there are some ethical issues here, as well as opportunities for reality checks, as long as you are careful about assumptions. Let’s look at reality checks first.
If you find out that a student has made significant purchases of non-educational items, you might expect that student to come to you at some point with a shortage of funds. If the student does not (or anticipating that he or she will not), you might want to check whether that student’s need analysis was accurate. If the student’s application data was not verified, you might want to do so. A closer look at FAFSA data and family finances might show errors, underreporting, or other unusual circumstances that affect the need analysis. Of course, the student’s need could have been correctly assessed but he has a part-time job that provides extra cash.
If the student does fall short when it comes time to pay bills, you could take that opportunity to educate the student with regard to budgets and other financial matters.
If you see non-educational purchases by a number of students, you might want to make sure your student budget is not inflated. The College Board provides estimates for low and moderate budgets by region and metropolitan areas, if you want something to compare.
Your bookstore might not have a procedure to monitor purchases, but if you can tell Mr. Ethics that students are buying expensive headphones, you’re also telling me that the nature of student expenditures are somehow coming to your attention. The ethical issue is whether the school has responsibility to act on inappropriate purchases if it knows about them. Is the failure to do so aiding and abetting the student’s violation of a Title IV eligibility criterion?
There are two categories of direct disbursement of aid funds to students. One is the books provision, and the other is “everything else.” The books provision requires a school to provide a way for Pell Grant recipients who will have a timely credit balance to buy books and supplies by the seventh day of the payment period. Schools can comply with this provision by offering the student some form of voucher at the campus bookstore. Some schools restrict the purchases that can be made with those vouchers to books and supplies. Since that disbursement is specifically intended to help needy students get the books they need to be successful in class, placement of restrictions on its use is appropriate. [Note that there is proposed rule to expand the books provision to all Title IV recipients. Some schools already do that on their own.]
Should you place restrictions on the other (everything else) cash disbursements that use some sort of voucher or debit card, if you have the means to do so? Given the gray areas and dangers of assumptions, you might want to consider instead an approach that looks at purchases of a truly suspect nature that come to your attention, and work with the student individually through counseling.
Does your school take an approach that differs? Let your colleagues know if you have found an approach that is successful.
Publication Date: 9/10/2015