20 AAC 15.924. Loan audit and institutional sanctions

(a) An institution that participates in an Alaska education loan program under 20 AAC 15.922 is subject to periodic audits for purposes of determining verification of education loan eligibility, management of education loan documents, compliance with the program participation agreement, and compliance with Alaska statutes and regulations.

(b) The audit report must state the error rate based upon the number of education loan disbursements that were not handled in compliance with this chapter, AS 14.43, 20 AAC 17 when applicable, or the program participation agreement, divided by the total number of loan disbursements in the sample.

(c) An institution that receives an audit error rate greater than 10 percent is on probation for a period of up to 24 months, unless the commission determines to reduce or extend that period.

(d) During a period of probation under (c) or (f) of this section, commission staff shall conduct at least one additional audit, and more if it determines them necessary.

(e) If the final additional audit under (d) of this section shows that the institution has failed to reduce its error rate below the level described in (c) of this section, the institution is not eligible to participate in Alaska education loan programs for a 12-month period. The institution may make written application to the commission for waiver or reduction of the period of ineligibility. If the institution submitting the application has either reduced its error rate from the rate determined in the initial probationary audit or is within five percentage points of the eligibility threshold described in (c) of this section, and documents the institution's compliance with a plan under this chapter to remedy the problems identified in the report, the commission shall waive the period of ineligibility and the institution will continue to be in a probationary status for a maximum of 24 months.

(f) Following a period of ineligibility set or redetermined after a waiver under (e) of this section, an institution approved to participate in Alaska education loan programs is on probation for up to a 24-month period.

(g) An institution determined to be ineligible under (e) of this section or under 20 AAC 15.927(b) may appeal the determination or the denial of the institution's application for waiver or ineligibility in writing to the commission within 30 days after the date of the letter advising of the determination. The institution must clearly state all objections to that determination and provide any material it wishes the commission to review. Upon receipt of the appeal, the commission will schedule a time and place of the meeting at which the commission will consider the appeal. The commission will review the material submitted by the institution and any response by commission staff. The commission will, in its discretion, allow the institution and commission staff to make brief presentations at its meeting. The institution has the burden of proving, by a preponderance of the evidence, that the institution should be allowed to participate in Alaska education loan programs under the statutes and regulations governing the programs. The commission's decision constitutes final agency action.

(h) An institution found during the compliance audit to have disbursed loan proceeds for which a student was not eligible shall return the loan proceeds to the commission within 60 days of the finding if

(1) the institution has previously received a written warning from commission staff of disbursement to an ineligible student and a subsequent violation of the same statute or regulation is identified;

(2) the ineligible student to whom the institution disbursed loan proceeds did not become eligible during the academic or vocational program period for which the loan proceeds were awarded; and

(3) that amount remains outstanding on the student's loan account.

(i) Findings of disbursement of loan proceeds for which a student was not eligible, and which the institution has returned to the commission within the time frame allowed under (h) of this section, do not impact the institutional error rate calculated under 20 AAC 15.924(b) . However, the institution may be required to operate in probationary status in order to continue program participation. If the commission finds fraud has been committed by the institution, the institution is responsible for returning all inappropriately disbursed loan proceeds to the commission and the institutional error rate calculated under 20 AAC 15.924(b) will not be adjusted under this subsection.

(j) If a borrower disputes having received loan proceeds disbursed to the school via an ACH transaction, the school shall provide evidence that the loan proceeds were delivered to the borrower. If the school cannot provide that evidence, the school shall reimburse the commission for the full amount of the loan principal and any accrued interest.

History: Eff. 3/22/97, Register 141; am 4/20/2000, Register 154; am 3/1/2002, Register 161

Authority: AS 14.42.030

Editor's note: As of Register 160 (January 2002), the regulations attorney made a technical revision under AS 44.62.125 (b)(6), and in accordance with ch. 85, sec. 45, SLA 2001, to change "student loan" to "education loan" in 20 AAC 15.924.

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