Make payment arrangements with the university for repayment of the loan as soon as possible to continue in good standing and to be eligible for future federal assistance. Oftentimes, the university can adjust the next refund amount for the repayment if the overpayment occurs during the same school year, but cannot deduct overpayment amounts from any subsequent school year.
If you feel that the overpayment was a result of a school error, you can object to the overpayment and have it reviewed. If the school is found liable for the error, the responsibility for repayment falls to the institution.
In the event of an overpayment, the university is responsible for repaying the grant amount to the Department of Education since they disbursed the funds and initial collection efforts fall to them. However, if repayment cannot be collected from the student due to inability to make contact or failure on the student's part to comply with repayment procedures, then it is the university's responsibility to report it to the the collections branch of the Department of Education, releasing them from liability or further collection efforts.
Make payment or payment arrangements directly with the Department of Education once you have received a letter stating that an overpayment has occurred and efforts to collect from the university has failed.
If satisfactory payment arrangements are made and kept, you will continue to be in good standing and eligible for federal assistance even while the debt is being settled. However, failure to do so will result in ineligibility for future Pell Grant awards, as well as possible garnishments to collect the overpayment.
Failure to make and fulfill payment arrangements can result in a garnishment of your annual tax refund until the overpayment is cleared. This is a last resort for the Department of Education and will only occur if all efforts to collect from the student in a timely manner has failed or been ignored.
A federal Pell Grant is "free" money issued to a student based on income and financial need and eligibility requirements are very clear. A student may be asked to verify information which is reported on the application and provide documentation to ensure that all income information is accurate. Overpayments are taken very seriously and all efforts will be made by the federal government to collect the debt. Making arrangements to repay the overpayment on your own will prevent these more aggressive collection methods and ensure your good standing.