Citation Nr: 22018560 Decision Date: 03/29/22 Archive Date: 03/29/22 DOCKET NO. 18-49 959A DATE: March 29, 2022 REMANDED Entitlement to a waiver of overpayment of educational assistance benefits under the Marine Gunnery Sergeant John David Fry Scholarship (Fry Scholarship) under 38 U.S.C. Chapter 33 (Post-9/11 GI Bill or Chapter 33) for the school term from April 2016 to December 2016 at European Academy of Cosmetology and Hair Dressing, to include whether the debt was properly created, is remanded. REASONS FOR REMAND The Veteran had active service from March 1996 to March 2014. He died in the line of duty in March 2014. The appellant is his daughter. In October 2021, the appellant appeared at a virtual hearing before the undersigned Veterans Law Judge (VLJ). During the hearing, the VLJ held the record open for 30 days for the appellant and her representative to submit additional evidence. The hearing transcript is of record. The appellant is seeking a waiver of overpayment of VA educational assistance benefits she received under the Fry Scholarship for her course of study from April 2016 to December 2016 at the European Academy of Cosmetology and Hair Dressing. Specifically, she contends that she has already repaid to VA all of the debt that was created from her withdrawal from all classes, effective June 1, 2016. An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C. § 5302; 38 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956(a). The preliminary issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). In other words, before deciding a request for waiver, VA must first consider the validity of the debt. A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911(c)(1); see also VAOPGCPREC 6-98. The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. See Schaper, 1 Vet. App. at 434. Basic eligibility for 38 U.S.C. Chapter 35 or Dependents Educational Assistance (DEA) benefits is established in one of several ways, including being the child of a Veteran who has a total and permanent disability rating from a service-connected disability; or, being the child of a deceased Veteran where the death was due to a service-connected disability. 38 U.S.C. § 3501(a)(1)(A); 38 C.F.R. §§ 21.3021(a)(1), 21.3041(a), (b). Furthermore, eligibility for the Fry Scholarship under Chapter 33 is established for a surviving spouse or child of an active-duty service member who died in the line of duty on or after September 11, 2001. The surviving spouse or child must be between the ages of 18 and 33 in order to receive the Fry Scholarship. In general, a claimant must make an irrevocable election between the DEA program and the Fry Scholarship. See Pub. L. No. 113-146, 128 Stat. 1754 (Aug. 7, 2014). The record shows that the appellant is eligible to receive benefits under the Fry Scholarship and that she received such benefits during the April 2016 to December 2016 school term. Under the provisions of Chapter 33, an individual who is pursuing a program of education at more than one-half time at an institution of higher learning located in the United States may receive a lump sum for established charges (tuition and fees) paid directly to the institution of higher learning; a monthly housing stipend; and for the first month of each quarter, semester, or term as applicable, a lump sum amount for books, supplies, equipment, and other educational costs. 38 U.S.C. § 3313; 38 C.F.R. § 21.9640. A monthly housing allowance is provided only for individuals with a rate of pursuit towards the objective of a program of education of more than 50 percent. 38 C.F.R. § 21.9640(b). Rate of pursuit means the measurement obtained by dividing the number of credit hours in which an individual is enrolled by the number of credit hours considered to be full-time training at the institution of higher learning. The resulting percentage (rounded to the nearest hundredth) will be the individual's rate of pursuit not to exceed 100 percent. VA will consider any rate of pursuit higher than 50 percent to be more than one-half training. Individuals pursuing a program of education offered entirely through distance learning may not receive a monthly housing allowance. 38 C.F.R. §§ 21.9505, 21.9640(b)(ii). For a determination that the overpayment was not properly created, such that the debt was not valid, it must be established that the claimant was either legally entitled to the benefits in question or, if the claimant was not legally entitled, then it must be shown that VA was solely responsible for the claimant being erroneously paid the benefits in question. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90, 55 Fed. Reg. 27757 (1990). Sole administrative error connotes that the claimant neither had knowledge of nor should have been aware of the erroneous award. Further, neither the claimant's actions nor her failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112(b)(9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments were erroneous. When an administrative error or error in judgment by VA is the sole cause of an erroneous award, the award will be reduced or terminated effective the date of last payment. 38 C.F.R. § 21.9635(r). If fault for an overpayment cannot "clearly be ascribed to the beneficiary," VA's policy is to assume that fault and not create a debt against the beneficiary. Dent v. McDonald, 27 Vet. App. 362, 380 (2015) (citing VAOPGCPREC 2-90 (March 1990)). However, when both VA and the beneficiary are partially at fault, the debt based on the effective date of reduction or discontinuance of benefits is properly created. See Jordan, 10 Vet. App. at 174. The record shows that the appellant was enrolled in a course of study at European Academy of Cosmetology and Hair Dressing from April 4, 2016 to December 13, 2016 and that she was taking 34 credit hours. Based on this information, the Agency of Original Jurisdiction (AOJ) processed and disbursed a monthly housing allowance to the appellant and tuition and fees directly to the appellant's school for the entire school term. In July 2016, the appellant's school notified VA that she was taking a leave of absence and that she would be returning to school in July 2016. However, the record shows that in August 2016, the appellant's school notified VA that she would not be attending school following the leave of absence and that her last day of attendance was June 1, 2016. Based on this information, the AOJ determined that an overpayment of Fry Scholarship educational benefits was created as the appellant received benefits from June 2, 2016 to December 13, 2016 even though she did not attend classes during this time. The AOJ calculated the overpayment in the amount of $11,234.93 for a housing allowance and $11,394.04 for tuition and fees. After the appellant filed a request for a waiver of overpayment of this debt, and provided mitigating circumstances, the Committee on Waivers and Compromises (Committee) granted a partial waiver in July 2017 of the housing debt of $8,980.93. This partial waiver reduced the outstanding monthly housing allowance debt to $2,254.00, but did not reduce the outstanding debt for tuition and fees, which remained at $11,394.04. However, the appellant testified during the October 2021 Board hearing that VA sent this outstanding debt to a third-party collections agency and that money from her Federal tax return was withheld to satisfy some portion of the debt. These actions further reduced the debt but it is not apparent from the record how much of the debt was reduced. For example, evidence in the claims file, including a November 2018 statement from the Department of the Treasury, shows an outstanding debt in the amount of $7,882.00, but the appellant and her representative testified during the Board hearing that the debt was initially reduced to $6,033.08 and further reduced to $2,880.04. Moreover, the appellant and her representative testified that the appellant's school returned to the appellant the amount of money it received for tuition and fees from VA, which was in the amount of $9,872.63. They testified that the appellant returned this entire amount to VA. During the Board hearing, the appellant and her representative stated that they had attempted to receive an audit of the appellant's education records from the AOJ but that they had been unsuccessful. The Board notes that the appellant's electronic claims file includes a December 2021 statement from a Veterans Claims Examiner to the appellant's representative, who indicated that there was no record of an audit request from the appellant or the representative. This statement further indicates that the AOJ has been authorized by the Debt Management Center (DMC) to waive the remaining tuition debt of $2,880.84 and that it was unclear why payments from the DMC to the appellant in April 2017 and March 2018 were returned to the DMC. Furthermore, this statement indicated that VA had over collected from the appellant $957.52. Given that it is unclear from the evidence of record the amount of debt outstanding, if any such debt is still present, the Board determines that a paid-and-due audit of the appellant's education records, to include the Fry Scholarship benefits under Post-9/11 GI Bill, should be conducted on remand. Such a report should show what actions were taken by the AOJ, what the total overpayment of VA education benefits was paid to the appellant and the European Academy of Cosmetology and Hair Dressing, how the total of the overpayment was calculated, and how much of the debt the appellant has repaid to VA. The matter is REMANDED for the following action: Perform a paid-and-due audit of the appellant's VA education records with consideration of her Fry Scholarship benefits under Chapter 33 for the course of study at the European Academy of Cosmetology and Hair Dressing from April 2016 to December 2016. It should be clearly indicated what amounts the appellant has already paid back, and what the total overpayment amount is left outstanding, if any. The audit report should be associated with the claims folder and a copy should be sent to the appellant and her representative. L. CHU Veterans Law Judge Board of Veterans' Appeals Attorney for the Board A. Hodzic, Counsel The Board's decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.