Complaint Review: Liberty University

That was very informative - thanks for posting it. I'm sure the students at proprietary schools will find it particularly useful, since those are the schools against whom financial aid complaints abound.

Could you please tell us at what point in your academics you dropped/withdrew the course?  That does it make a difference, as you cited above.

Terribly sorry, but I happen to have the IFAP handbook. Only the government will hold the money for 30 days for first time borrowers who are freshman. According to the handbook, a college can only hold funds (specifically FSA loans) for three days then must transfer it to the student's account. From that point, the college has only 14 days to disburse the funds, i.e. take out for tuition, etc. and the remaining is sent to the student/parent (if applicable). 

http://ifap.ed.gov/bbooks/attachments/1005BlueBookCh14DisbursingFSAFunds.pdf            Page 33

EXCESS CASH As mentioned in the discussion of the advanced payment method,a school must disburse funds no later than three business days following the date the school receives them. Excess cash is any amount of program funds, other than Perkins funds and funds received under the just-in-time payment method (see the discussion in chapter 13),
that a school does not disburse to students by the end of the third business day. Excess cash must be returned to the Department immediately.

Sometimes a school cannot disburse funds in the required three days because of circumstances outside the schools control. For example, a school may not have been able to disburse funds because of a change in a students enrollment status, a students failure to attend classes as scheduled, or a change in a students award as a result of verification. In view of these circumstances, a school may maintain an excess cash balance for up to seven additional days if the conditions of 34 CFR 668.166(b)(1)(i) are met.

Page 35
2-123
Chapter 14 General Rules for Disbursing and Returning FSA funds TITLE IV CREDIT BALANCES A Title IV credit balance occurs whenever a school credits Title IV program funds to a students account and those funds exceed the students allowable charges. A school must pay the excess Title IV program funds (the credit balance) directly to the student as soon as possible, but no later than 14 days after:
the date the balance occurred on the students account, if the balance occurred after the first day of class of a payment period (see Example 1 on the next page); or the first day of classes of the payment period if the credit balance occurred on or before the first day of class of that payment period (see Example 2 on the next page).

A Title IV credit balance occurs only if the total amount of Title IV funds exceeds allowable charges. For example, if a students total allowable charges are $1,500, and credits to the students account comprise $1,000 in FSEOG, $500 in state aid funds, and $500 in Pell
Grant funds, although there is an excess of $500 on the account, a Title IV credit balance would not exist. This is because the total amount of Title IV funds ($1,500) does not by itself exceed the amount of allowable charges ($1,500). If, in this example, the amount
of Pell Grant funds credited to the students account was $600 rather than $500, a Title IV credit balance of $100 would exist: $100 is the amount by which the total Title IV funds credited to the account ($1,600) would exceed the allowable charges ($1,500). The order in
which these funds were credited does not matter.

 Page 36

Holding credit balances A school is permitted to hold excess funds (credit balances) if it
obtains a voluntary authorization from the student or parent. If a school receives authorization to hold excess funds, the school must identify the amount of funds the school holds for the student or parent in a subsidiary ledger account designated for that purpose. The school also must maintain, at all times, cash in its bank account at least equal to the amount the school holds for students. Because FSA program funds are awarded to students to pay current year charges, notwithstanding any authorization obtained by a school from a student or parent, the school must pay any remaining balance on loan funds by the end of the loan period, and any other remaining programs funds by the end of the last
payment period in the award year for which they were awarded.

http://ifap.ed.gov/fsahandbook/attachments/1011FSAHbkVol4Ch1.pdf PAGE 22 AGAIN STATED IN ANOTHER CHAPTER! 
 
PROMPT DISBURSEMENT RULES In general, schools that are not receiving federal cash from the Department through one of the heightened cash monitoring payment methods must make disbursements as soon as administratively feasible but no later than 3
business days after receiving funds from the Department. The disbursements may be credited to the students account or made directly to the student or parent, as discussed earlier.

Note that these time frames for disbursing to the students account (or directly to the student/parent) are different than those for paying FSA credit balances to the student or parent. As we discussed earlier, a school generally has 14 days to pay an FSA credit balance to the student or parent, unless it has written permission to hold the credit balance.

The following is the link to the main page:
http://ifap.ed.gov/ifap/byAwardYear.jsp?type=fsahandbook&awardyear=2011-2012

I am not trying to be rude; however, please ensure you have read the IFAP handbook before stating federal law.  Having that said, you can find it for yourself where the law also states if a class is dropped before the student takes it then the college must return the funds to the government. I did not post it because I have posted so much all ready.

OK, I have a few questions.  When you said you withdrew before you even took a class, does that mean you NEVER attended, or did this happen after you had already completed a semester or so with them?  It makes a difference because of how the financial aid is computed.

Second, it is not against the law for them to hold your excess loan funds for a reasonable period. I believe it's 30 days after the start of the term/semester.  The reason for this is that if you withdraw or drop, your financial aid amount will have to be re-calculated.

Let's assume, for the sake of argument, that this was your first term with them. You're approved for student loans. School computes your tuition, and sends you the balance. Then you drop or withdraw. The school is now on the hook for the money they have to return to the government, and they have to try and get it from you.  It's a lot easier for them to return the money to the government BEFORE having sent you the remaining funds.