In accordance with sections 413(d)(2), 442(d)(2), and 462(i)(4) of the Higher Education Act of 1965 as amended (HEA), if a school returns more than 10 percent of its Federal Perkins Loan (Perkins Loan), Federal Work Study (FWS), or Federal Supplemental Educational Opportunity Grant (FSEOG) allocations, respectively, for an award year, the allocation for the second succeeding award year for that program is reduced by the dollar amount returned from the earlier year unless the school requests an underuse penalty waiver. The deadline to request a waiver of the 2014-2015 Award Year penalty of FWS and FSEOG for the underuse of 2012-2013 Award Year funds is February 7, 2014.


A school can determine if it is subject to an underuse penalty by reviewing its most recent FISAP or Campus- Based Tentative Funding Worksheet for 2014-2015 (see sections below). The school may submit an underuse penalty waiver request if the school is able to explain that the underuse was due to circumstances beyond its control and why those circumstances are not expected to recur.


The request and justification for the waiver of the underuse penalty must be submitted electronically by 11:59 P.M. (ET) on February 7, 2014. The transmission must be completed and accepted by 12:00 midnight to meet the deadline. Paper waiver request submissions will not be accepted.


Note: If the unexpended 2012-2013 FWS and FSEOG amounts exceed 10 percent of the respective allocations and the unexpended amounts exceed a school’s G5 balance, the difference must be repaid through G5 within 30 days of the annual Campus-Based funds closeout in April 2014. During the closeout process, any unexpended amounts will be deobligated from G5. A school’s Financial Aid Administrator will be notified by e-mail when the closeout is complete.


How to determine if there is an Underuse Penalty on the Tentative Funding Worksheets

The Campus-Based Tentative Funding Worksheets for 2014-2015 have been posted to the eCampus-Based (eCB) Web site. If the school failed to expend more than 90 percent of its 2012-2013 program allocation(s), anunderuse penalty is applied to the 2014-2015 awards and the awards are reduced by the full amount that was not expended. When a school accesses the worksheets from the eCB Web site’s “Self-Service” page, the FSEOG Worksheet is at the top of the screen. The FWS Worksheet is below it. The percentage of underused FSEOG funds is shown in the FSEOG Tentative Funding Worksheet at Item 32. Underused Percentage and the tentative FSEOG Allocation Reduction amount is shown at Item 33. Allocation Reduction. The percentage of underused FWS funds is shown in the FWS Tentative FundingWorksheet at Item 35. Underused Percentage and the tentative explanation of all the fields in the Tentative Funding worksheet will be provided in an attachment to a forthcoming Electronic Announcement posted on the Information for Financial Aid Professionals (IFAP) Web site.


How to Request an Underuse Penalty Waiver

A school may request a waiver of the underuse penalties for one or both of the FSEOG and FWS programs:

  • Access the school’s submitted FISAP on the eCB Web site.
  • Select the “yes” button in Part II, Section C, Field 6.
  • Click on “Submit” at the bottom of the menu on the left side of the screen.
  • Select “Submit Waiver” from the drop down list.
  • On the “Additional Information” screen:
    • Enter information that explains the circumstances that caused the underuse of the allocation.
    • Specify why those circumstances were beyond the school’s control.
    • Specify why those circumstances are not expected to recur.
    • Also indicate in this explanation that the entire underused portion of the allocation has been returned to the Department through G5.
  • After entering the information, click the “Submit” button under the justification.
  • When ready to submit the request, click “Continue to Submit.” A message will be displayed indicating the request has been submitted.


What Happens Next

A panel of Department of Education staff members will review the penalty waiver requests and justifications and will notify the school in an e-mail to the Financial Aid Administrator whether the request has been granted or denied.


If the request for waiver is granted, the 2012-2013 allocation will be reduced by the unused amount, but the underuse penalty will not be applied when final awards for 2014-2015 are made.


If the request for waiver is denied, the 2012-2013 allocation will be reduced by the unused amount and the underuse penalty will be applied when final awards for 2014-2015 are made.

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