The Issue The issue is whether Petitioner is entitled to any funding, under the Florida Education Finance Program, for those full-time equivalent students whom Petitioner enrolled, taught, and initially reported, in a dropout prevention program, but whom Petitioner later reported in a lower-funded basic program after discovering that these full-time equivalent students exceeded the legislatively imposed enrollment ceiling applicable to the program group of which the dropout-prevention program is a part.
Findings Of Fact On average, Florida school districts receive about 50 percent of their financial support from state sources, 43 percent from local sources, and 7 percent from federal sources. In 1993-94, the Legislature appropriated $4,526,812,758 under the Florida Education Finance Program (FEFP) and required local funding of $3,109,579,079. Two parts of the FEFP funding process are relevant to this case: setting weighted enrollment ceilings (caps) and reporting full-time equivalent students (FTEs). This case arose when the Auditor General discovered that Petitioner reported Dropout Prevention FTEs as lower-funded, basic education FTEs. Petitioner reported these FTEs in this fashion due to its concern that it would receive no FEFP funding for these FTEs, if reported as Dropout Prevention FTEs, because they were over the cap set for the program group of which the Dropout Prevention program was a part. Setting caps takes place in two stages. The first and generally more important stage starts with the preparation by each school district of projections, for the following school year, of FTEs by program. The second stage of setting caps requires that Respondent make complicated, technical adjustments when actual FTEs, by program group, exceed the cap for that program group. The terms, "program" and "program group," are important. For 1993-94, Section 236.012(1), Florida Statutes (1993) (all references to "Section" shall be to the 1993 Florida Statutes), identifies the following program groups and their constituent programs: Basic programs.-- Kindergarten and grades 1, 2, and 3. Grades 4, 5, 6, 7, and 8. Grades 9, 10, 11, and 12. Special programs for exceptional students.-- [list of 15 exceptional student education programs, such as specific learning disability and emotionally handicapped] Special adult general education programs.-- * * * Special vocational-technical programs job-preparatory.-- * * * Special vocational-technical-adult supplemental.-- * * * Students-at-risk programs.-- Dropout prevention. Kindergarten through grade 3 ESOL [English Speakers of Other Languages]. Grades 4 through 8 ESOL. Grades 9 through 12 ESOL. Each district initially submits its FTE projections to Respondent where various persons with programmatic and funding expertise examine and review the projections for accuracy. The cap-setting process continues when, pursuant to Section 216.136(4), Respondent forwards the FTE projections to the Public Schools Education Estimating Conference (Estimating Conference), which consists of representatives of the House and Senate staffs, the Governor's Office, and the Joint Legislative Committee. The Estimating Conference accepts, increases, or decreases the FTE projections and sends its projections to the Florida Legislature, which, in deciding upon FEFP appropriations for the next school year, may accept, increase, or decrease the Estimating Conference's FTE projections. This marks the end of the first stage of the cap-setting process. Both stages of the cap-setting process reveal a finely tuned funding process that weighs the need for predictability in funding, so that the Legislature can know how much it is sending to the districts and each district can know how much it will have to spend, against the need for flexibility, so that, for instance, if Hurricane Andrew sends numerous ESOL students from Dade County to Hillsborough County, after the first stage of the cap-setting process is completed, the receiving school district can obtain the funds properly to educate these children. The second stage of the cap-setting process is described in Section 236.081(1)(d). Section 236.081(1)(d)1 authorizes Respondent to calculate a "maximum total weighted full-time equivalent student enrollment for each district." Of course, Section 236.081(1)(d)2 directs Respondent to begin the second stage of the cap-setting process by starting with the FTEs set at the end of the first stage, or, in other words, the "enrollment estimates used by the Legislature to calculate the FEFP." Section 236.081(1)(d)3 directs Respondent to calculate caps by groups of program groups. Referring back to the above- cited statute listing program groups, Group 1 is the first of the six listed groups, which is nearly all of basic education. Group 2 includes the second and sixth groups, which are, respectively, exceptional student education (ESE) and students-at-risk programs (At-Risk), including Dropout Prevention. The rest of Group 2 is minor parts of basic education and all vocational education programs in grades seven thorough twelve. Group 3 consists of all adult education programs. The most complicated part of the second stage of setting caps is described in Section 236.081(1)(d)3.a-c. This section first makes clear that this part of the cap-setting process does not involve Group 1, which, as noted above, is nearly all of the basic education programs. Two provisions make this clear. First, Subsection 236.081(1)(d)3.a and b apply only to Groups 2 and 3. Second, the last sentence of Section 236.081(1)(d)3.b.(IV) states: "For any calculation of the FEFP, the enrollment ceiling [i.e., cap] for [G]roup 1 shall be calculated by multiplying the actual enrollment for each program in the program group by its appropriate program weight." Section 236.081(1)(c) directs the Legislature to establish annually in its General Appropriations Act a cost factor for each of the listed programs under the six program groups. This adjustment reflects, for instance, the greater cost of educating ESE students versus basic-education students. The remainder of this recommended order will ignore Group 3 because it plays no role in this case and its mention unnecessarily complicates the presentation of information. Section 236.081(1)(d)3.a describes the caps for Group 2 as the sum of the weighted caps (i.e., stage-one FTEs for each program times a cost factor for each program) for each program contained in Group 2. The resulting cap must be increased by the receipt of FTEs from the Department of Health and Rehabilitative Services (now Department of Juvenile Justice), but this adjustment is irrelevant to this case. Section 236.081(1)(d)3.b addresses the possibility of over-enrollment. (The discussion of reporting FTEs takes place later in this recommended order.) Section 236.081(1)(d)3.b directs Respondent, "for any calculation of the FEFP," to follow a specific procedure when actual enrollments exceed the cap for Group 2; the purpose of the procedure is to reduce the "weighted [actual] enrollment for that group to equal the enrollment ceiling [i.e., cap]." Section 236.081(1)(d)3.b(I) directs Respondent first to subtract the weighted cap for each program from the weighted actual enrollment for that program. If the result is greater than zero for any program, Section 236.081(1)(d)3.b(II) directs Respondent to calculate a reduction proportion "for the program" by dividing the net amount by which the weighted actual enrollment in the program group exceeds the weighted cap for the group by the gross amount by which the weighted actual enrollments in over-the-cap individual programs exceed the weighted caps for each of these groups. An illustration is useful. Assume a hypothetical group subject to capping that contains only four programs with caps of 100, 100, 300, and 500 FTEs. Assume actual enrollments, respectively, of 100, 100, 380, and 490 FTEs. The reduction proportion for the third program, which is the only over-the-cap program, would contain a numerator of 70 (because of the netting of the 10 under-the-cap FTEs in the fourth group) and a denominator of 80. Section 236.081(1)(d)3.b(III) directs Respondent to multiply the resulting reduction proportion by the total amount by which the program group's enrollment exceeds the cap. The first sentence of Section 236.081(1)(d)3.b(IV) directs Respondent to subtract the resulting prorated reduction amount from the program's weighted enrollment. An important principle emerges at this point: the over-the-cap issues are determined on the basis of the program group. Over-the-cap FTEs in programs within a group are offset by unused FTEs from under-the-cap programs in the same group. As already noted, the last sentence of Section 236.081(1)(d)3.b(IV) directs Respondent to calculate the cap for Group 1 by multiplying the actual enrollment in each program by its cost factor. In the same vein, Section 236.081(1)(d)3.c limits the maximum reduction for Group 2 (and Group 3) by stipulating that the weighted enrollment shall be not less than the sum of the following two numbers. For programs with cost factors of 1.0 or more, such as ESE and At-Risk programs, Respondent must, as required by Section 236.081(1)(d)3.c(I), multiply the "reported FTE" by 1.0. For programs with cost factors of less than 1.0, Respondent must, as required by Section 236.081(1)(d)3.d(II), multiply the "projected FTE" by the actual cost factor. Thus, the effect of Section 236.081(1)(d)3.c(I) is to provide that the weighted cap for Group 2 is never less than the amount yielded by multiplying the "reported FTE[s]" for all programs in the group with a cost factor of 1.0 or more by 1.0. However, it is important to note that the minimal funding guaranteed by Section 236.081(1)(d)3.c(I) does not ensure that all over-the-cap FTEs in, say, Dropout Prevention or Specific Learning Disabilities, will receive a cost factor of no less than 1.0, even if over the cap; instead, the statute guarantees only that, after all adjustments, no district will receive less than a cost factor of 1.0 for all reported FTEs in Group 2. Turning to the reporting of FTEs, Section 236.081(1)(a) requires each school district to conduct no more than nine week- long surveys for the purpose of reporting actual FTEs. This statute also requires that each district compute its FTEs "in accordance with the regulations of the state board." For 1993-94, Respondent issued a document entitled "Standard Procedures for Reporting FTE Earned, Course and Other Issues Regarding the Florida Education Finance Program 1993-94" (Standard Procedures). Standard Procedures requires districts to use the cited procedures "for reporting unweighted FTE by student by course, for allocating residual FTE to courses funded through the Basic Program categories after special program by student by course FTE is allocated, and for maintaining audit documentation for FTE reporting procedures and elements." Standard Procedures, page 1. Standard Procedures requires districts to sort their course records into "rank order" with all so-called "special" programs, which includes all programs in the ESE and At-Risk program groups, in the first group to be reported, and all basic programs in the second group to be reported. Standard Procedures, page 11. However, each district may choose in which order the special program category courses will, in fact, receive consideration. That is, if a student has course records with FEFP Program Numbers in two special program categories and one Basic Program, the district may chose [sic] which of the special program categories gets selected for consideration first for determination of FTE Earned, Course, except that BOTH special program categories are considered and FUNDED before any time for the Basic Program is considered for funding. . . . Standard Procedures, pages 11-12. Prior to submitting its FTEs on the approved form, each district must edit its data so that, among other things, "[a]ll courses with special program FEFP Program Numbers must be considered and funded prior to considering courses with Basic program numbers [subject to two exceptions irrelevant to this case]." Standard Procedures, page 20. For reporting FTEs in a Dropout Prevention program, Standard Procedures provides: Section 228.041(29), Florida Statutes as amended, provides the definition of a dropout student. However, a student meeting this definition must also meet the eligibility and program requirements as set forth in Section 230.2316(4), Florida Statutes. Finally, only those students who meet the eligibility criteria, are admitted to the program according to the admission procedures, and participate in instruction specified in any one of the eligible dropout prevention programs under operating procedures in an approved district dropout plan, as approved by the Department of Education for 1993-94, may be reported as FTE in FEFP Program Number 120 [Dropout Prevention Program]. . . . All students who are reported as participating in the Dropout Prevention Program must be properly shown as being in one of the Dropout Prevention Program categories. Failure to properly identify the program will result in the FTE Earned, Course, being nulled for the record submitted. Standard Procedures, page 27. After each district reports its FTEs, Respondent calculates the proper FEFP funding by multiplying the appropriate FTEs by the appropriate base student allocation, which, under Section 236.081(1)(b), the Legislature must set annually in its General Appropriations Act. Under Section 236.081(1)(c), Respondent then multiplies applies the cost factor for each program before undertaking the second stage of the cap-setting described above and in Section 236.081(1)(d). In 1993-94, the base student allocation was $2501.05, the cost factor for grades 4-8 basic education was 1.0, the cost factor for grades 9-12 basic education was 1.224, and the cost factor for dropout prevention was 1.615. In 1993-94, the funding allocated for basic-education students was $1000-$1500 less per student than the funding allocated for dropout prevention. During 1993-94, Respondent reported 15,166.04 full-time equivalent students (FTEs) in nine elementary schools, four middle schools, three high schools, one adult education center, one area vocational-technical school, two exceptional centers, and two other educational centers. Rule 6A-1.0451, Florida Administrative Code, provides that the Commissioner of Education shall prescribe the dates for FTE surveys. ( All references to Rules are to the Florida Administrative Code.) For 1993-94, the FTE surveys took place July 12-16, 1993; October 4-8, 1993; February 7-11, 1994; and June 20-24, 1994. Rule 6A-1.0451(7) provides that districts shall report the FTEs in all special programs in the special program cost factor prescribed in Section 236.08(1)(c), "when the student is eligible and is attending a class, course, or program which has met all of the criteria for the special program cost factor." By memorandum dated March 9, 1994, in connection with the February FTE survey, one of Petitioner's deputy superintendents directed Petitioner's Director of Management Information Services to change 127 unweighted FTEs from the Dropout Prevention program to a basic program to "prevent us from exceeding our caps in Category [Group] 2 programs." Petitioner later reported these FTEs by reporting them as basic education FTEs when they were eligible for, enrolled in, and previously reported in the Dropout Prevention program. By Audit Report issued October 20, 1995, the Office of the Auditor General determined that Petitioner misreported 86.52 unweighted FTEs as basic education FTEs, when it should have reported them as Dropout Prevention FTEs. The Audit Report also reclassified one student, at 0.4165 unweighted FTEs, from the Dropout Prevention program to a basic education program due to the absence of adequate documentation. Rule 6A-1.0453(2) authorizes the Auditor General to conduct audits of districts receiving FEFP funding. Rule 6A-1.0453(3) requires the audit report to identify: Errors in the reported full-time equivalent membership by program category; Improper classification or placement of individual students assigned to educational alternative or exceptional student programs; and Failure of classes or programs to meet criteria established by the State Board [citations omitted] for basic or special programs. Rule 6A-1.0453(4) provides: Upon receipt of an official audit report, the Deputy Commissioner for Planning, Budgeting and Management shall compute the amount of adjustment to the district's allocation of state funds necessary to compensate for the errors or deficiencies noted in subsection (2). In those instances where a student has been improperly classified or placed in an exceptional student program, and in those instances were a special program fails to meet the prescribed criteria, the adjustment shall be computed on the basis of the basic program cost factor for which each student qualifies. Except for adjustments made during the fiscal year in which the discrepancies occurred[,] adjustments shall be limited to fund allocations and no changes shall be made in full-time equivalent membership data. By letter dated February 28, 1996, Respondent advised Petitioner of a reduction in FEFP funding for the 1993-94 school year, resulting from the findings of the Audit Report, of $346,428. A letter dated February 12, 1999, from counsel for Respondent to counsel for Petitioner, identifies the portion of this sum attributable to the misreporting of Dropout Prevention FTEs as $267,715. Rule 6A-1.0453(5) requires Respondent to provide official notice to Petitioner of all adjustments following the issuance of the audit report. This notice must include a "statement citing the specific law or rule upon which the finding of each discrepancy is based, and the authority under which the adjustment is to be made " The parties participated in an informal conference, as provided by Rule 6A-1.0453(6). The parties have largely framed the issue in the informal conference as whether Petitioner is free to report Dropout Prevention FTEs as basic education FTEs. The parties were unable to resolve this issue. Attempting to find a basis for compromise, Respondent's representatives reviewed Petitioner's Dropout Prevention records in the hope of finding grounds for determinations of ineligibility, so as to permit a reclassification of over-the-cap Dropout Prevention FTEs as basic education FTEs and allow some funding, as the Audit Report did in the case of the one student improperly classified for the Dropout Prevention program. However, Respondent's representatives were unable to find such documentation errors. Thus, Respondent has maintained its position that the Dropout Prevention FTEs in excess of the enrollment cap are funded at zero, not even at the lesser basic education rate. (Sometimes, Respondent's witnesses express the zero funding differently by saying that the over-the-cap Dropout Prevention FTEs do not generate their own FEFP funds, but participate pro rata in the FEFP funds generated by the under-the-cap Dropout Prevention FTEs. However, this amounts to the same thing: no more FEFP funding for enrolling and teaching over-the-cap Dropout Prevention FTEs. All references in this recommended order to zero funding thus include prorate funding.) Nothing in the record cites the authority by which Respondent zero-funded the over-the-cap Dropout Prevention FTEs, whom Petitioner reported as basic education FTEs. Interestingly, six of Respondent's employees cited the "law" that over-the-cap FTEs, presumably by group rather than individual program, receive zero funding, but not one of them could cite to the authority for this "law." (Eggers, page 17; Stewart, page 11; Goff, page 11; Pierson, page 10; Butler, page 30; and Jarrett, pages 20 and 22.) Section 236.012(2) states in part that the purpose of the FEFP is: (2) To increase the authority and responsibility of districts for deciding matters of instructional organization and method and to encourage district initiative in seeking more effective and efficient means of achieving the goals of the various programs. The material provisions of the above-described laws remain in effect today. The issue of funding over-the-cap FTEs in At-Risk programs is not unique to this case. Another case involving Putnam County is reportedly pending. Also, an Audit Report issued June 15, 1995, involving FEFP funding for the Hillsborough County School District found intentional misreporting of over-the-cap ESOL FTEs as basic education FTEs to avoid zero funding. Respondent's Policy Director, Link Jarrett introduced a much-needed perspective when he alluded to the necessity of balancing the educational needs of children against the complex funding considerations that have dominated this dispute. Mr. Jarrett testified: . . . we are making a good faith effort to the parent and to the child to place the student in the program, regardless of what the funding is. That's easy for me to maybe say at the State level. * * * . . . the basic [tenet] on equal education opportunity in serving these children is you place them in the programs that they need to be served in. And to some extent, you might take a risk in exceeding your cap. And is that worth not placing a student in a program and not giving him the appropriate--I would say no. . . . [If I were a District Finance Officer], I would be saying serve the kids, and where they fall--I would give you my best estimate of the children to be served, and I would serve them in those programs, and I would let the chips fall where they may. Transcript of Link Jarrett deposition, pages 39-40.
Recommendation It is RECOMMENDED that the State Board of Education enter a final order declaring that Petitioner is entitled to: a) funding at the Dropout Prevention cost factor for any FTEs that qualified to be reported as Dropout Prevention FTEs and that were not over the Group 2 cap; and b) funding at the basic education cost factor for any remaining FTEs that qualified to be reported as Dropout Prevention FTEs, but were over the Group 2 cap. DONE AND ENTERED this 13th day of April, 1999, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of April, 1999. COPIES FURNISHED: Anne Longman Edwin A. Steinmeyer Lewis, Longman & Walker, P.A. Post Office Box 10788 Tallahassee, Florida 32302-0788 Dean Andrews Deputy General Counsel Department of Education 1701 The Capitol Tallahassee, Florida 32399-0400 Michael H. Olenick, General Counsel Department of Education The Capitol, Suite 1701 Tallahassee, Florida 32399-0400 Honorable Tom Gallagher Commissioner of Education Department of Education The Capitol, Plaza Level 08 Tallahassee, Florida 32399-0400
The Issue The issue for resolution in this proceeding is whether Respondent's lottery prize should be withheld to be applied against an unpaid student loan.
Findings Of Fact In an application and promissory note dated June 30, 1987, Respondent, Ms. White, applied for an auxiliary student loan in the amount of $2,000 to attend school at Orlando College in Orlando, Florida, for the loan period June 1987 through June 1988. The loan was issued by Florida Federal Savings and Loan Association (lender) in one disbursement on or about September 2, 1987. Interest accrues on the loan at a variable rate which is currently 10.27 percent per year. This loan is Loan Number AL00010400 (loan 10400) which was guaranteed by the federal government through the DOE. In an application and promissory note dated December 9, 1987, Respondent applied for a second auxiliary student loan in the amount of $2,000 to attend the school for the same loan period. That loan was made by the lender in one disbursement on or about March 8, 1988. Interest accrues on that loan at a variable interest rate which is currently 10.27 percent per year. That loan is Loan Number AL00014434 (loan 14434) which was guaranteed by the federal government through DOE. As auxiliary loans, each of Respondent's loans accrued interest from the date of disbursement. For auxiliary loans, the borrower is required to make loan payments even while attending school. However, a borrower may request a deferment or forbearance from payment for several reasons, including attending school on a minimum part-time basis. While an auxiliary loan is in deferment/forbearance status, interest still accrues on the loan. In an application dated January 4, 1988, Respondent requested a deferment of repayment because she was attending school on a full-time basis. That application was approved for any payments due between June 22, 1987, through June 20, 1988. Following the deferment period, Harper-Smith and Associates, Inc., the lender's loan servicer (herein referred to as HSA) sent Respondent a repayment disclosure letter dated August 31, 1988. The letter outlined the terms and conditions of the repayment schedule assigned to both of Respondent's loans. As of the date of the disclosure letter, Respondent owed $4,082.40 in outstanding principal and capitalized interest for both loans. Additionally, Respondent owed a total of $36.23 in accrued unpaid interest. The disclosure letter indicated that Respondent's first payment of $56.06 was due September 20, 1988. Respondent failed to make any payments on the loans and Respondent was declared in default by HSA. HSA filed a lender application for claim payment with DOE dated May 11, 1989. On November 23, 1989, DOE, as guarantor of the loans, paid HSA for both of Respondent's defaulted auxiliary student loans. When DOE acquired loan 10400 and loan 14434, the outstanding interest was capitalized, resulting in a balance of $4,680.86 ($4,082.40 in claim principal and $598.46 in claim interest). This sum is subject to a variable interest rate which is currently 10.27 per cent per year. Since DOE acquired Respondent's loans, payments received from the Respondent's federal income tax returns (herein referred to as IRS offsets) have been applied to Respondent's outstanding balance as follows: 4/09/91 $1,082 3/30/92 $1,628 10/04/93 $1,140 5/08/95 $ 614 5/08/95 $ 727 After applying each IRS offset payment according to federal regulations (outstanding interest first, then principal), Respondent's account had a net balance of $1,445.43 in principal due on May 8, 1995, and all interest was paid through that date. DOE's earlier certification of amount owed was based on DOE's records which did not include the 1993 and 1995 IRS offsets. Ms. White provided the evidence of those and DOE verified that those should be applied against her debt. On June 30, 1995, Respondent filed for Chapter 7 bankruptcy protection. The filing occurred less than seven years after Respondent's loans went into repayment on September 20, 1988. On October 17, 1995, the United States Bankruptcy Court for the Middle District of Florida, Orlando Division, issued a "Discharge of Debtor" order in Respondent's case, number 95-03350-687. That order provides in pertinent part, "The above-named debtor is released from all dischargeable debts . . . . . . [including] debts dischargeable under 11 U. S. C. [Section] 523." On April 28, 1996, the Department subrogated (sold) loan 10400 to the United States Department of Education (USDOE). DOE still owns loan 14434. On May 8, 1995, the day the last IRS offset payment was applied, Respondent owed $722.72 in principal on loan 14434 which currently accrues interest at the rate of 10.27 percent per year. No other payment was received between May 8, 1995, and the time the DOE received Respondent's lottery winnings which are the subject of this action. Ms. White produced evidence that an additional $941.69 was withheld in an IRS offset, but that was after her lottery winnings were withheld. By letter of February 12, 1999, the DOE notified the Department of the Lottery (Lottery) that Respondent owed DOE $2,811.88, in principal and interest, as a consequence of her outstanding defaulted student loan. That amount has been amended as explained in paragraph 8, above. Pursuant to Section 24.115(4), Florida Statutes, the Lottery transmitted Respondent's $800 lottery prize to the DOE. By letter of February 25, 1999, DOE notified Respondent that it was in receipt of her $800 lottery prize in accordance with Section 24.115(4), Florida Statutes. DOE applied Respondent's lottery winnings to her outstanding balance on the remaining loan, number 14434, held by DOE in accordance with federal requirements.2 DOE's letter also advised Respondent of her right to request a formal hearing pursuant to Section 120.57, Florida Statutes, to contest the action. This proceeding arose when Respondent made her request for formal hearing. DOE has demonstrated that even when the five IRS offsets noted above were properly applied to both loans, there remained a balance due on loan 14434 of $722.72 in principal as of May 8, 1995, plus interest accruing since that date, plus $585.11 in collection costs. DOE also demonstrated that loan 14434 was not discharged in bankruptcy, because it was not in repayment for more than 7 years when the bankruptcy petition was filed, the minimum time required in order for a student loan to be eligible for discharge.
Recommendation Based on the foregoing Findings of fact and conclusions of Law, it is RECOMMENDED that DOE enter a final order which authorizes Respondent's lottery prize of $800 be applied toward her outstanding debt for a defaulted student loan. DONE AND ENTERED this 2nd day of August, 1999, in Tallahassee, Leon County, Florida. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of August, 1999.
The Issue Whether Respondents (private schools participating in certain scholarship programs) engaged in fraud and/or failed to comply with provisions required of private schools participating in such scholarship programs and, if so, whether Petitioner (Commissioner) should suspend or revoke Respondents’ rights to participate in the scholarship programs.
Findings Of Fact Barrington and Barrington II are private schools located in Florida City. They are located in the same facility under the same administration. Both have been eligible to receive McKay and FTC Scholarships for qualified students. Gwendolyn Thomas is the long time administrator of Barrington, which has been in existence for approximately 25 years. Ms. Thomas is also the administrator of Barrington II, which has been in existence for approximately two years. For medical reasons, Ms. Thomas did not participate in the day-to-day operation of either school between October 2010 and November 2013. During her absence, Mack Brown, the assistant principal, was in charge of both schools until he left in June 2013 to start a competing school. Ms. Thomas has been in charge of the day-to-day operation of Barrington and Barrington II since November 2013. McKay Scholarship payments are disbursed on a quarterly basis.2/ Pursuant to sections 1002.39(8)(b) and 1002.421(2)(d), any private school participating in the McKay Scholarship Program is required to affirmatively verify to the Department of Education that each scholarship student is regularly enrolled in the school at least 30 days prior to the issuance of any quarterly scholarship payment. Pursuant to section 1002.39(9)(f), McKay Scholarship checks are made payable to the parent of a scholarship student, which only the parent can sign. Private school personnel cannot sign such a check on behalf of the parent, even with the parent’s permission. Prior to June 9, 2011, Student A was enrolled in Barrington and received a McKay Scholarship. On June 9, 2011, Student A left Barrington and has not been a student at Barrington since June 9, 2011. Between August 26, 2011, and August 23, 2013, nine checks, totaling $12,230.25, were issued to the mother of Student A pursuant to the McKay Scholarship Program. Those checks were issued on the following dates in the following amounts: August 26, 2011 $1,336.75 October 27, 2011 $1,336.75 January 24, 2012 $1,336.75 March 21, 2012 $1,336.75 August 21, 2012 $1,382.50 October 22, 2012 $1,382.50 January 23, 2013 $1,382.50 March 20, 2013 $1,382.50 August 23, 2013 $1,353.25 9. The back of each check contains an endorsement that appears to be the name of Student A’s mother. Student A’s mother did not sign any of these checks. Each check was signed by an employee of Barrington or Barrington II. Each check was deposited into an account owned by Barrington. For each of these payments, Barrington submitted documentation to the Department of Education that Student A was attending Barrington prior to the issuance of the payment, without verifying that Student A was in attendance. As noted above, Student A was not in attendance. On October 4, 2013, the Commissioner filed her Administrative Complaint against Barrington and suspended Barrington’s participation in the McKay and FTC Scholarship Programs. The Commissioner had information that Student A was not enrolled in Barrington and had probable cause to believe that Barrington Academy had engaged in fraudulent conduct.3/ Afterwards, many of the Barrington students were administratively transferred to Barrington II, and continued to receive scholarship payments. Prior to June 7, 2013, Student B was enrolled in Barrington II and received a McKay Scholarship. On June 7, 2013, Student B was taken into the custody of the DJJ and enrolled in a residential facility in Greenville, Florida. Student B was in the custody of DJJ until March 7, 2014.4/ Between September 25, 2013, and January 23, 2014, three checks, totaling $8,316.75, were issued to the mother of Student B pursuant to the McKay Scholarship Program. Those checks were issued on the following dates in the following amounts: September 25, 2013 $2,772.25 October 23, 2013 $2,772.25 January 23, 2014 $2,772.25 The back of each check contains an endorsement that appears to be the name of Student B’s mother. Student B’s mother did not sign any of these checks. Each check was signed by an employee of Barrington or Barrington II. Each check was deposited into an account owned by Barrington. For each of these payments, Barrington II submitted documentation to the Department of Education that Student B was attending Barrington II prior to the issuance of the payment, without verifying that Student B was in attendance. As noted above, Student B was not in attendance. On February 19, 2014, the Commissioner filed her Amended Administrative Complaint against Barrington and Barrington II and suspended their participation in the McKay and FTC Scholarship Programs. The Commissioner had information that Student B was not enrolled in Barrington II and had probable cause to believe that Barrington II had engaged in fraudulent conduct. Barrington has reimbursed the Department of Education for the McKay Scholarship payments made on behalf of Student A. Barrington II has deposited with its attorney sufficient funds to reimburse the Department of Education for the McKay Scholarship payments made on behalf of Student B. Although Ms. Thomas had returned as administrator when at least two of the McKay Scholarship payments at issue were processed by a school employee, she testified, credibly, that she had not authorized that action and was unaware of the misconduct before the Administrative Complaint and the Amended Administrative Complaint were filed. The persons responsible for the deficiencies discussed above have either voluntarily left their employment or have been fired. Barrington and Barrington II have hired a person to ensure compliance with McKay and FTC Scholarship Programs.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Education revoke the participation of Barrington Academy and Barrington Academy II in the McKay Scholarship Program and the FTC Scholarship Program. It is further RECOMMENDED that both schools be permitted to re- apply to participate in these programs after the Department of Education has been reimbursed for the scholarship payments made on behalf of Student B and after both schools demonstrate that they have personnel and written procedures that will ensure compliance with all applicable rules and statutory provisions. DONE AND ENTERED this 19th day of May, 2014, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of May, 2014.
The Issue Should Petitioner's Application for Consumer's Certificate Of Exemption be granted?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: Petitioner is an organization incorporated under the laws of the State of Florida. Petitioner applied for a Consumer's Certificate of Exemption with the Department of Revenue pursuant to Section 212.08(7), Florida statutes. The Department of Revenue is the agency charged with the responsibility of granting or denying a Consumer's Certificate of Exemption pursuant to Chapter 212.08(7), Florida Statutes. Petitioner has not been qualified as non-profit pursuant to Section 501(c)(3), Internal Revenue Code of 1986, as amended. Petitioner failed to establish facts to show that it is a "religious institution" as that term is defined in Section 212.08(7)(o)2.a., Florida Statutes. Petitioner failed to establish facts to show that it is a "charitable institution" as that term is defined in Section 212.08(7)(o)2.b., Florida Statutes. Petitioner failed to establish facts to show that it is a "educational institution" as that term is defined in Section 212.08(7)(o)2.d., Florida Statutes. All of the exhibits and testimony presented by Petitioner relate to JBS Incorporated, "Jackson Merit National and International Scholarship Fund Corporation, et. al. (A private Foundation and Corporation)," Elijah Jackson individually, or one of the other referenced entities none of which is the applicant or the Petitioner in this case. To the extent that the exhibits relate to Petitioner they indicate that Petitioner is "a/k/a Educational Festival of Polk County."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a final order denying Petitioner's application for a Consumer's Certificate of Exemption. DONE AND ENTERED this 17th day of September, 1999, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of September, 1999. COPIES FURNISHED: Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Elijah Jackson, Jr. Qualified Representative Educational Incentive Program, Incorporated Post Office Box 29895 Lakeland, Florida 33804-2895 William B. Nickell, Esquire. Department of Revenue 501 South Calhoun Street, Suite 204 Tallahassee, Florida 32301
The Issue Whether Petitioner has defaulted on student loans and, if so, the principal amounts due on the loans, as well as accrued interest, and collection costs. Whether Petitioner's employer should be required to withhold payments from Petitioner's pay pursuant to Section 112.175, Florida Statutes.
Findings Of Fact Petitioner is Johnny Martin. Petitioner's mailing address is 11431 Quailhollow Drive, Jacksonville, Florida. Respondent is the Florida Department of Education. The Department's business address is 325 West Gaines Street, Tallahassee, Florida. The Department is a guarantee agency which holds the loan account in question after paying the claim of the lender on July 28, 1994. All loans in this proceeding are Supplemental Loan(s) for Students (SLS), also known as Florida Auxiliary Loans. SLS loans are not subsidized by the federal government. Therefore, the federal government has no responsibility for payment of interest during periods of deferment or forbearance and there is no grace period for SLS loans. During any period of deferment or forbearance, such as when a borrower is unemployed, the borrower's repayment obligation may be suspended; however, interest accrues to the account for which the borrower is responsible. When the deferment or forbearance ends, the outstanding interest is capitalized on the loan. SLS loans accrue interest at the rate of 12 percent per year from the date of disbursement. Persons eligible to receive SLS loans include parents of dependent undergraduate students. As set forth below, Petitioner, as parent of an eligible dependent undergraduate student, received four SLS loans. Loan 1: Petitioner applied for and received Loan A000000442 in 1983. This loan, in the amount of $3,000.00, will be referred to as Loan 1. Although the Department is the guarantor of Loan 1, the lender never declared the loan in default or sold it to the Department. Therefore, Loan 1 is not at issue in this proceeding. Loan 2: Petitioner applied for and received Loan A000001064 in 1984. This loan, in the amount of $3,000.00, will be referred to as Loan 2. The lender declared Petitioner in default and sold Loan 2 to the Department as guarantor. Because Loan 2 was in repayment status for more than seven years, exclusive of suspensions of the repayment period, Loan 2 was discharged in bankruptcy. Therefore, Loan 2 is not at issue in this proceeding. Loan 3: Petitioner applied for and received Loan A000003767 in 1985. This loan, in the amount of $3,000.00, will be referred to as Loan 3. The lender declared Petitioner in default and transferred Loan 3 to the Department as guarantor. Because Loan 3 was in repayment status for more than seven years, exclusive of suspensions of the repayment period, Loan 3 was discharged in bankruptcy. Therefore, Loan 3 is not at issue in this proceeding. Loan 4: On or about August 5, 1986, Petitioner executed an Auxiliary (SLS) Loan application on behalf of his daughter, Kelly Aleta Martin, an eligible dependent undergraduate student. On or about September 8, 1986, Petitioner executed the promissory note for this loan. This SLS Loan was in the amount of $3,000.00. This loan was disbursed on or about October 9, 1986. The Department guaranteed this loan. Throughout exhibits presented by the Department, the loan number for this SLS Loan is A000007005; however, for convenience, herein this loan will be referred to as Loan 4. Loan 4 is the only loan at issue in this proceeding. Petitioner's first payment for Loan 4 was due October 25, 1986. The payment due date later changed to the 20th of each month. Petitioner's last payment to the lender was made on July 17, 1990. However, as Petitioner was behind in his payments, this payment was applied to the payment due May 20, 1990. The Petitioner is considered in repayment status for 44 months, from October 1986 through May 1990. A borrower is not considered in repayment status during any suspension of the repayment period, including any period of forbearance or deferment. Petitioner applied for and received an unemployment deferment on September 18, 1990. This deferment was for the period from July 21, 1990 through December 28, 1990. Because Petitioner was not current in his payments, he requested and received a forbearance from the lender for the payments due on June 20 and July 20, 1990, in order to qualify for the unemployment deferment. The forbearance together with the unemployment deferment brought Petitioner current in his payments; however, they suspended the repayment period for Loan 4 for seven months (two months for the forbearance and five months for the deferment). Petitioner failed to make any payments following the deferment period ending December 28, 1990. Petitioner applied for and received an unemployment deferment on April 23, 1991. This deferment was for the period from February 24 through July 23, 1991. Because Petitioner failed to make any payments following the deferment ending December 28, 1990, he again requested and received a forbearance for the payments due January 20 and February 20, 1991. The forbearance and unemployment deferment brought Petitioner current in his payments; however, they again suspended the repayment period for Loan 4 by another seven months (two months for the forbearance and five months for the deferment). Following Petitioner's unemployment deferment ending July 1991, he failed to resume payment to the lender beginning August 20, 1990. Thereafter, the lender declared Petitioner in default and made application to the Department for claim payment based on the guarantee. However, the Department refused to pay the lender's claim citing due diligence violations, and as a result, Petitioner is considered in repayment status from August 20, 1991 through April 20, 1992, or nine months, even though no payments were actually received by virtue of his Fresh Start Application. Petitioner submitted a Fresh Start Application to the lender dated May 13, 1992. This document reaffirmed the student loan obligation and, when received by the lender on May 19, 1992, reinstated the Department's guarantee of Loan 4. In an application dated May 24, 1992, Petitioner requested another unemployment deferment. The lender refused Petitioner's request for an unemployment deferment due to the fact that Petitioner was working at the time. However, the lender granted Petitioner a forbearance. This forbearance covered payments due from May 20 through December 20, 1992. Thereafter, Petitioner again requested and was granted forbearance of payments due through June 20, 1993. These forbearances, from May 20, 1992 through June 20, 1993, suspended the period Loan 4 is in repayment status by 14 months. Petitioner failed to resume payments beginning July 20, 1993, the final due date at default. In 1994, the lender declared Petitioner in default on Loan 4 and made application to the Department for claim payment based on the guarantee. The Department paid the default claim on Loan 4 on July 28, 1994. Although no payments were received from July 20, 1993 through July 20, 1994, or 13 months, Petitioner is considered in repayment status for that time because there was no forbearance or deferment in place. When the Department acquired Loan 4, Petitioner owed $2,195.68 in principal and $290.19 in accrued (claim) interest. These figures were capitalized by the Department and yield the figure of $2,484.18 in capitalized principal which is subject to interest at the rate of 12 percent per year. Beginning in 1995, Petitioner entered into a voluntary wage garnishment agreement with the Department. Under this agreement and through the period Petitioner was under the bankruptcy court's jurisdiction, a total of $383.95 was received by the Department and applied to Petitioner's account in accordance with Title 34, Code of Federal Regulations Section 682.404(f), relating to how borrower payments will be applied. The entire amount received was applied to outstanding interest. Prior to filing bankruptcy, Petitioner's Loan 4 was considered in repayment status from July 29, 1994 through January 5, 1995, during the time it was held by the Department. The Petitioner was credited for being in repayment status for five months, even though he made no payments. Additionally, Petitioner was credited for being in repayment status for 12 months in 1995, whether or not regular payments were received under Petitioner's voluntary wage garnishment agreement. Because Petitioner filed for bankruptcy prior to the January 20, 1996, the payment due date, the month of January 1996 cannot be counted as being in repayment status. Petitioner filed for Chapter 13 bankruptcy protection on January 11, 1996. The Department filed a proof of claim with the bankruptcy court for Loans 2, 3, and 4 in the principal amount of $5,571.91, the amount of capitalized principal due on the accounts. The Department filed with the court the claim of $5,647.02 due on the accounts through date of filing the case. See item 5 on page 2 of Department's Exhibit 5. This amount was the capitalized principal and interest due. On February 4, 1999, the United States Bankruptcy Court for the Middle District of Florida, Jacksonville Division, issued an "Order Discharging Debtor After Completion of Chapter 13 Plan" in Petitioner's case, number 96-00175-3F3. That order provides in pertinent part, "The debtor is discharged for all debts provided for by the plan or disallowed under 11 U.S.C. [Section] 502, except any debt . . . for a student loan or educational benefit overpayment as specified in 11 U.S.C.[Section]523(a)(8)." In 1996, Title 11 United States Code Section 523(a) provided in pertinent part: A discharge under . . . this title does not discharge an individual debtor from any debt-- for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an education benefit, scholarship or stipend, unless-- such loan, benefit, scholarship, or stipend overpayment first became due more than 7 years (exclusive of an applicable suspension of the repayment period) before the date of the filing of the petition . . . Pursuant to this order, Petitioner's debt to the Department for Loans 2 and 3 was discharged. The first payment for Loan 4 was due October 25, 1986. Petitioner filed for bankruptcy on January 11, 1996, nine days prior to the payment due date of January 20, 1996. There were 111 months from the month the first payment of Loan 4 was due through the month prior to the filing of bankruptcy (the month that bankruptcy was filed cannot be counted if the payment due date was after the date Petitioner filed for bankruptcy). Petitioner was in forbearance or deferment status for 28 months which suspends the period Loan 4 is considered in repayment status. Petitioner was in repayment status on Loan 4 for 83 months regardless of whether he actually made payments on the account. Therefore, Loan 4 was not discharged. Section 682.410(b)(2) of Title 34, Code of Federal Regulations, provides that the Department shall impose collection costs as follows: Collection charges. Whether or not provided for in the borrower's promissory note and subject to any limitation on the amount of those costs in that note, the guarantee agency shall charge a borrower an amount equal to reasonable costs incurred by the agency in collecting a loan on which the agency has paid a default or bankruptcy claim. These cost may include, but are not limited to, all attorneys fees, collection agency charges, and court costs. Except as provided in [Sections] 682.401(b)(27) and 682.405(b)(1)(iv), the amount charged borrower must equal the lesser of -- The amount the same borrower would be charged for the cost of collection under the formula in 34 CRF 30.60; or The amount the same borrower would be charged for the cost of collection in the loan was held by the U.S. Department of Education. The Department established that the amount of the annual collection cost mandated by Title 34 Code of Federal Regulations Section 682.410(b)(2) for the loan at issue in this proceeding should be calculated at least annually at the rate of 25 percent of the outstanding principal and accrued interest. Petitioner agreed to pay these costs in the application and promissory note he executed. Petitioner is employed by the Duval County School Board, a political subdivision of the State of Florida. As an employee of a political subdivision of the State of Florida, Petitioner is subject to the provisions of Section 112.175, Florida Statutes, and Chapter 28-40, Florida Administrative Code. These provisions pertain to employees of the State of Florida or its political subdivisions who have defaulted on an education loan made or guaranteed by the State of Florida. The Department notified Petitioner by letter dated August 13, 1999, that he had one or more student loans in default and offered him the opportunity to make voluntary payments on the loans. The letter also advised Petitioner that the Department would seek to make involuntary withholdings if he did not make voluntary payments. Petitioner elected to request the formal hearing which triggered this proceeding. As stated above, the capitalized principal due the Department for Loan 4 is $2,485.87. This amount reflects the principal due and the outstanding interest accrued on the account at the time the Department acquired the loan from the lender. All payments received by the Department were applied to outstanding interest which accrued on the account after the loan was bought by the Department, and no payment was applied to the capitalized principal. The capitalized principal accrues interest at the rate of 12 percent per year of $.82 per day. As of February 4, 1999, after taking into consideration the $383.95 received by the Department, the unpaid accrued interest for Loan 4 was $881.74. Pursuant to federal regulations collection costs assessed at the rate of 25 percent of principal and interest due as of February 4, 1999, were $867.08. Therefore, as of February 4, 1999, the total principal, interest, and collection costs due for Loan 4 totaled $4,234.69. Interest continues to accrue to the account as provided by law and collection costs may be reassessed as provided by law.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order that adopts the findings of fact and conclusions of law contained herein, finds that Petitioner, as of February 4, 1999, owes the sum of $4,234.69, and orders the involuntary wage withholding of Petitioner's pay through his employer, Duval County School Board, pursuant to Section 112.175, Florida Statutes, and Chapter 28-40, Florida Administrative Code. DONE AND ENTERED this 22nd day of December, 2000, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 2000. COPIES FURNISHED: Johnny Martin 11431 Quailhollow Drive Jacksonville, Florida 32218-3621 Ronald G. Stowers Assistant General Counsel Department of Education The Capitol, Suite 1701 Tallahassee, Florida 32399-0400 Honorable Tom Gallagher Commissioner of Education The Capitol, Plaza Level 08 Tallahassee, Florida 32399-0400 Michael H. Olenick, General Counsel Department of Education The Capitol, Suite 1701 Tallahassee, Florida 32399-0400
The Issue Whether Petitioner has defaulted on student loans and, if so, the principal amounts of the loans, any accrued interest, and any collection costs. Whether Petitioner's employer should be required to withhold payments from Petitioner's pay pursuant to Section 112.175, Florida Statutes.
Findings Of Fact As will be set forth in more detail, there are three loans at issue in this proceeding. For ease of reference, these loans will be referred to as Loans One, Two, and Three.2 Loans One and Three were issued as Florida Guarantee Student Loans, which are popularly known as Stafford Loans. Loans Two and Four were supplemental loans issued by the Student Loan Services program, which are referred to SLS loans. Loans One, Two, and Three were funded and are at issue in this proceeding. THE STAFFORD LOANS, LOANS ONE AND THREE On September 22, 1986, Petitioner executed an Application and Promissory Note for a Guaranteed Student Loan, number 545967. This Stafford Loan, referred to as Loan One, was in the amount of $5,000. Loan One was disbursed in two equal installments of $2,500 (less appropriate fees). The first installment was disbursed on or about December 4, 1986, and the second installment was disbursed on or about December 11, 1986. On June 1, 1987, Petitioner executed an Application and Promissory Note for a Guaranteed Student Loan, number 586917. This Stafford Loan, referred to as Loan Three, was in the amount of $2,261.00. Loan Three was disbursed in one installment of $2,261.00 (less appropriate fees) on June 25, 1987. The promissory notes and other paper work documenting Loan One and Loan Three provided that interest at the rate of 8% per annum would begin to accrue on these loans six months after Petitioner ceased to attend school on at least a half-time basis. Because a Stafford Loan is guaranteed by the federal government, the obligor may be eligible to receive periods of deferment and periods of forbearance during which the federal government may or may not make interest payments. If the federal government made interest payments during a particular period, Petitioner is not obligated for interest during that period. If the federal government did not pay interest during a particular period, Petitioner is obligated to pay interest for that period. Respondent is not claiming any interest on Loans One and Three for any period while interest was paid by the federal government. While Petitioner was attending school on at least a half-time basis and for six months thereafter (the grace period), Loans One and Three were in periods of forbearance, and the federal government paid the interest for both loans. Petitioner ceased attending school on at least a half-time basis on March 18, 1988. The six month grace period on Loans One and Three ended on September 18, 1988, which is the date interest began to accrue on Loans One and Three. As of that date, the principal balance due on Loan One ($5,000.00) and on Loan Three ($2,261.00) totaled $7,261.00. Between September 18, 1988, and January 23, 1997, interest accrued on Loans One and Three in the total amount of $4,744.75, as follows: Between September 18, 1988, and June 15, 1993, interest accrued on these two loans in the total amount of $2,754.80. Between June 16, 1993, and October 6, 1993, interest accrued on these two loans in the total amount of $245.87. Both loans were in a period of administrative forbearance, but the federal government did not pay the interest. Between October 7, 1993, and January 7, 1994, both loans were in a period of deferment due to Petitioner's unemployment, and the interest was paid by the federal government. Between January 8, 1994 and January 31, 1994, interest accrued on these two loans in the total amount of $51.73. Both loans were in a period of administrative forbearance, but the federal government did not pay the interest. Between February 1, 1994, and April 30, 1994, both loans were in a period of deferment due to Petitioner's unemployment, and the interest was paid by the federal government. Between May 1, 1994, and July 24, 1994, interest accrued on these two loans in the total amount of $189.88. Both loans were in a period of administrative forbearance, but the federal government did not pay the interest. Between July 25, 1994, and April 30, 1995, both loans were in a period of deferment due to Petitioner's unemployment, and the interest was paid by the federal government. Between May 1, 1995, and December 1, 1995, interest accrued on these two loans in the total amount of $492.65. Both loans were in a period of forbearance, but the federal government did not pay the interest. Between December 2, 1995, and January 23, 1997, interest accrued on these two loans in the total amount of $1,009.82. Petitioner defaulted on the repayment of Loan One. Petitioner has not made any principal or interest payment since the loan was disbursed. Petitioner defaulted on the repayment of Loan Three. Petitioner has not made any principal or interest payment since the loan was disbursed. On January 23, 1997, Respondent purchased Loan One and Loan Three.3 As January 23, 1997, the principal and the accrued interest for Loan One, plus the principal and the accrued interest for Loan Three, totaled $12,005.75. THE SLS LOAN: LOAN TWO On January 31, 1987, Petitioner executed Auxiliary Loan Application and Promissory Note number 8914 for a supplemental student loan through the Student Loan Services program (Loan Two). This type loan, generally referred to as an SLS loan, was in the principal amount of $4,000.00. Loan Two was disbursed in one installment of $4,000.00 (less appropriate fees) on or about April 9, 1987. The promissory notes and other paper work documenting Loan Two provided that interest at the rate of 12% per annum would begin to accrue upon disbursement. SLS loans also provide for periods of deferment and forbearance during which no payment is due. The federal government does not make interest payments during a period of deferment or forbearance. The borrower is obligated to pay all of the interest from date of disbursement.4 Petitioner defaulted on the repayment of Loan Two. Petitioner has not made any principal or interest payment since the loan was disbursed. Respondent purchased Loan Two from the holder on September 11, 1997.5 Interest in the amount of $7,348.91 accrued on Loan Two between April 9, 1987, the date the loan was disbursed, and September 11, 1997. The total principal balance and accrued interest for Loan Two as of September 11, 1997, was $11,348.91. COLLECTION COSTS Section 682.410(b)(2) of Title 34, C.F.R., provides that Respondent shall impose collection costs, as follows: (2) Collection charges. Whether or not provided for in the borrower's promissory note and subject to any limitation on the amount of those costs in that note, the guaranty agency shall charge a borrower an amount equal to reasonable costs incurred by the agency in collecting a loan on which the agency has paid a default or bankruptcy claim. These costs may include, but are not limited to, all attorney's fees, collection agency charges, and court costs. Except as provided in §§ 682.401(b)(27) and 682.405(b)(1)(iv), the amount charged a borrower must equal the lesser of-- The amount the same borrower would be charged for the cost of collection under the formula in 34 CFR 30.60; or The amount the same borrower would be charged for the cost of collection if the loan was held by the U.S. Department of Education. Respondent established that the amount of the annual collection cost mandated by 34 C.F.R. 682.410(b)(2) for each defaulted loan at issue in this proceeding should be calculated at the rate of 25% of the outstanding principal and accrued interest. PRINCIPAL, INTEREST, AND COLLECTION COSTS AS OF JUNE 1, 1998 Respondent calculated the principal, interest, and collection costs for each loan as of June 1, 1998. For Loan One the amount of the collection costs assessed by the Respondent was $2,231.60. Interest that accrued between January 23, 1997, and June 1, 1998, totaled $895.13. As of June 1, 1998, the total principal, interest, and collection costs for Loan One totaled $11,394.01. For Loan Two the amount of the collection costs assessed by the Respondent was $2,961.20. Interest that accrued between September 11, 1997, and June 1, 1998, totaled $981.29. As of June 1, 1998, the total principal, interest, and collection costs for Loan One totaled $15,291.39. For Loan Three the amount of the collection costs assessed by the Respondent was $1,009.13. Interest that accrued between January 23, 1997, and June 1, 1998, totaled $404.78. As of June 1, 1998, the total principal, interest, and collection costs for Loan One totaled $5,152.39. The total amount due from Petitioner as of June 1, 1998, for Loans One, Two, and Three for principal, interest, and collection costs is $31,837.79. WAGE WITHHOLDING Petitioner is a social worker employed by Dade County, a political subdivision of the State of Florida. As an employee of a political subdivision of the State of Florida, Petitioner is subject to the provisions of Section 112.175, Florida Statutes, and Chapter 28-40, Florida Administrative Code. These provisions pertain to employees of the State of Florida or its subdivisions who have defaulted on an education loan made or guaranteed by the State of Florida. Respondent notified Petitioner in writing by letter dated October 1, 1997, that Loans One, Two, and Three were in default and offered him the opportunity to make voluntary payments on these loans. The letter also advised Petitioner that the Respondent would seek to make involuntary withholdings if he did not make voluntary payments. Petitioner thereafter elected to request the formal hearing that triggered this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order that adopts the findings of fact and conclusions of law contained herein, finds that Petitioner, as of June 1, 1998, owes the sum of $31,837.79, and orders the involuntary wage withholding of Petitioner's pay through his employer, Dade County, Florida, pursuant to Section 112.175, Florida Statutes, and Chapter 28-40, Florida Administrative Code. DONE AND ENTERED this 7th day of August, 1998, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 7th day of August, 1998
