CASH HANDLING REQUIREMENTS
Electronic Funds Transfer (EFT)
EFT allows campuses to consolidate receipt of cash for large numbers of students participating in Federal loan programs. Campuses using the EFT process avoid the need to receive and distribute thousands of individual loan checks in every loan disbursement cycle. Prior to establishment of the EFT process, banks issued checks made payable to individual students. Campus staff had to sort these checks and hand them out or mail them to the students. EFT cash is received in lump sums and credited to student accounts on the student information system. After charges for registration fees, housing, etc. are applied, the remaining balance, if any, is disbursed to the student. In order to receive funds from an outside source the campus must establish a non-treasury bank account (1). This account will be used to receive funds via EFT. Cash received into this account will then be moved by check into the campus's treasury bank account from which it can then be disbursed.
(1) In order to participate in the EFT process lender banks must sign an agreement with the campus and with the aggregator, for example, Education Loan Management's National Disbursement Network (ELM).
Process
- ELM consolidates loan funds from participating banks and initiates an EFT transaction.
- Cash is transferred to the campus's non-treasury bank account.
- Cash is transferred by check from the campus's non-treasury account to the campus's treasury account.
- Data is sent by ELM to the California Student Aid Commission (EDFUND).
- The data is made available to the campus on the EFDUND web site.
- The campus downloads the data, which includes a roster and loan transaction data.
- The transaction data is uploaded into the campus's student system (e.g. the IA/SCT Student Information System's Billing/Receivable module), and the student's account is credited for the amount of the loan.
- Charges on the student's account (e.g. for registration, housing, meal plans, etc.) may be applied to the loan payment and any other payments or financial aid that has been credited to the student's account.
- The net amount is disbursed to the student.
Go to Cash Receipt Policy Context
Direct Deposit
Direct deposit allows campuses to consolidate the disbursement process, issuing a single check to its own account in a local non-treasury bank. The cash is then distributed to numerous student bank accounts in other participating banks. These banks do not need to be associated (except as it relates to this process) with the bank in which the campus's non-treasury bank account is established. Campuses using this process avoid the need to print and distribute thousands of checks in every financial aid disbursement cycle.
Campuses must establish a relationship with a bank that is capable of facilitating the direct deposit process (e.g. Wells Fargo). There may be charges in connection with this service. These will need to be negotiated. (See Cash Flow Considerations below). Participating students must provide a voided check or savings account deposit slip. These are sent by the campus to the bank to establish the direct deposit process for the student.
Process
- During the disbursement cycle a file of direct deposit disbursements is created.
- The file is transmitted to the non-treasury bank. If there is not sufficient balance on hand in the EFT account in the non-treasury bank, a deposit must be made for the total amount to be disbursed to all participating students less any loan funds that have not yet been transferred to the treasury bank account.
- The bank transfers cash to the banks of the individual students via ACH transactions.
- Those banks credit the accounts of the individual students in the appropriate amounts.
