Proration and Disbursement Nuances of the Pell Lifetime Eligibility Limit

By | December 20, 2016

By John W. Mioduszewski

On December 23, 2011, Congress enacted the Consolidated Appropriations Act. This legislation reduced the limit of a student’s Federal Pell Grant Lifetime Eligibility to 12 semesters (or equivalent), and went into effect at the start of the 2012-2013 Federal Award Year. Traditionally, an Academic Year is based on two semesters in length, and due to the 12 semester (or equivalent) limit, the 600% LEU is derived from a student’s eligibility to receive 6 academic years of Pell.

The Pell 600% Lifetime Eligibility Used (600% LEU) is based on the percentage of eligible Pell funds received cumulatively on an Award Year to Award Year Basis. The cumulative LEU % includes all Pell funds dating back to the 1973-1974 Award Year, in which the Federal Pell Program was implemented. This percentage is now standard on every ISIR and can be found in the NSLDS Financial Aid History section.

For students who have received 500% or less of their lifetime Pell eligibility, Pell Awards are calculated and disbursed normally, as the student would be eligible to receive their full Scheduled Award for the applicable Award Year. Where the rule can become quirky is when calculating and disbursing Pell awards for students with a Pell LEU of greater than 500%. Your Financial Aid Staff should pay special attention to these students.

Calculating and Disbursing Reduced Pell Awards due to Eligibility

Students with Pell LEU above 500% will not be eligible to receive 100% of their Full Scheduled Eligible Award but will have partial eligibility. This eligibility is computed by subtracting the student’s Pell LEU from the 600.000% Maximum Eligibility. For example, a student with a Pell LEU of 537.605% will have 62.395% of their Pell eligibility left. If the student had a O EFC on their 14/15 ISIR, the students remaining Pell eligibility would be $3,575.23 (62.395% x $5,730).

While calculating a student’s remaining Pell Eligibility is fairly straightforward, the proper disbursement of reduced Pell Awards is a bit counterintuitive. It may seem logical to disburse reduced Pell awards in the same way Pell is normally disbursed, with the full Pell award split into equal disbursements throughout the applicable academic year. However this is not the case with reduced Pell awards due to LEU.

For the example above, let’s assume this student is enrolled as full time in a semester program at your Institution. During the first payment period, the student should receive $2,865, as that is the full time Pell amount and it is not affected by the student’s Pell lifetime limitation. During the second payment period, the student should receive $710.23, as that is the student’s remaining lifetime Pell eligibility. After the Pell disbursement of $710.23, the student will have hit their 600% Pell LEU and will not be eligible to receive any additional Pell funds.

Other Pell LEU Considerations

There are a couple of other nuances you and your Financial Aid staff should be aware of in regards to the Pell LEU limitation. When calculating reduced Pell awards, there is no de minimum amount for purposes of determining a student’s reduced award. In other words, even if a student has a Pell LEU close to 600%, they should receive the reduced Pell award, no matter how small the calculated award may be. For example, a student with a Pell LEU of 599.500% and an EFC of 0 is eligible to receive 0.500% of their full Scheduled 2014-2015 Pell amount of $5,730, which is $28.65.

In addition to the reduced Pell LEU limit, Institutions are now liable for Pell overpayments if the information the school had at the time of the disbursement indicated that a student would exceed their 600.000% lifetime limit. Additionally, Institution’s will be liable for any overpayments that are caused by the Institution not updating their Pell disbursement reports within the required 15 day timeframe.

In the event of a Pell overpayment, the Institution could be excused from being held liable as long as the Institution maintains the sufficient documentation that they were compliant with all disbursement and reporting requirements and, that the overpayment was due to factors outside of the Institution’s control.

Due to the new limitations and requirements associated with the Pell 600% LEU rule, it is important to provide adequate training to ensure that your Financial Aid Department is aware of these issues and understands how to properly calculate and disburse Pell awards that are reduced due to Lifetime Eligibility Limits.

We here at McClintock & Associates will continue to monitor any changes or developments in Pell Lifetime Eligibility limitations and will bring you any updates should the governing legislation evolve or change. Please don’t hesitate to reach out to us during the year if you have any questions on Pell LEU limitations or any other student financial aid compliance matters.

Volume 2, Issue 1
Winter 2015

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