By: Matt McClintock
Confusion as to whether charges for books, supplies, kits and other related goods and services should be prorated has been an ongoing issue for years in the post-secondary education industry. The Department of Education has provided the following wording in response to the confusion. “The determining factor in whether the proration requirement applies is whether the charge for books, supplies and equipment is an institutional charge. The Department’s longstanding guidance has been that books and supplies must be considered an institutional charge if a student does not have a real and reasonable opportunity to purchase the required course materials from any place but the school. A student has a “real and reasonable” opportunity to obtain required course materials from another source if, the required course materials are available for purchase at a relatively convenient location unaffiliated in any way with the institution; and the institution does not restrict the availability of financial aid funds, so the student can exercise the option to purchase the required course materials from alternative sources in a timely manner. If students do not have a real and reasonable opportunity to obtain the required books and supplies from another source, the institution must ensure that it meets requirements for including the costs for those items in tuition and fees, e.g. ensuring that the books and supplies are made available at or below market rates.”
To make this as straight forward as possible books, supplies, kits and other related goods should be prorated among payment periods if the charge is part of the Institution’s enrollment agreement and or any addendum. If the Institution routinely debits the student’s ledger account for the amount of a charge along with tuition and fees it is considered to be an institutional charge and should be added to the enrollment agreement as a best practice. A good example is a registration fee. Registration fees are included on most if not all enrollment agreements and are required to be prorated to each payment period the student is enrolled.
You may be asking why does it really matter if books and supplies are considered an Institutional charge? Proper proration of charges will affect when a Title IV credit balance exists and a calculation of an R2T4. To calculate the proration of charges for Title IV credit balances and R2T4 calculations the Institution should divide the total charges by the hours or credits in the total program and multiplying it by the number of hours or credits in the payment period. This result provides you with the prorated cost for the payment period to assess if there is a Title IV credit balance or R2T4 charges.
Proper proration of institutional charges can appear to be a gray area even after reading the Department of Education’s response. If you simplify the charges to being routine and on a student’s enrollment agreement it can make school employee’s job much simpler.