Schools facing a reduction in their campus-based funding due to underuse have until later this month to request the penalty be waived.
The Department of Education recently released an Electronic Announcement outlining that, when a school returns more than 10% of its Federal Supplemental Educational Opportunity Grant (FSEOG) or Federal Work Study (FWS) funds in a given award year, the allocation for the second succeeding award year is reduced by the dollar amount returned, unless a waiver is requested and approved by the Secretary.
The February 3 deadline is approaching to request a waiver of the 2025-26 award year for the underuse of 2023-24 award year funds.
By using the instructions provided in the announcement, a school can determine if it is subject to an underuse penalty for FSEOG or FWS funds. If the school can explain that the underuse was due to circumstances beyond its control and why it is not expected to reoccur, the school can submit an underuse penalty waiver request. Instructions for completing the waiver request through COD are also included in the announcement.
Once a waiver request is submitted, the Department will review the request and justification and notify the school’s Financial Aid Administrator via email as to whether the request has been granted or denied.
If the waiver is granted, the underuse penalty for that program will not be applied to the final 2025-26 awards.
When a school accesses the Campus-Based Tentative Funding Worksheets for 2025-26, which will be posted to the COD website by January 31, a school that failed to expend more than 90% of its 2023–24 program allocation(s), will have the underuse penalty applied to the tentative award allocations.
Questions regarding the underuse penalty waiver can be directed to the FSA Partner and School Relations Center at 1-800-848-0978 or via email to CODSupport@ed.gov.
