Federal Student Aid - IFAP

   

Publication Date: December 2000

DCL ID: GEN-00-24

Summary: Return of Title IV Aid--Volume #1

December 2000

GEN-00-24

Subject: Return of Title IV Aid--Volume #1

Summary: This letter provides additional guidance on the application of the Return of Title IV Aid requirements. The subjects addressed in this letter are:

  • Applicability of the Return of Title IV Aid requirements when a student is not charged by the institution
  • Institutional charges
  • Withdrawals from standard term-based programs using modules
  • Withdrawal date--Institutions that are not required to take attendance
  • Withdrawal date--Institutions that are required to take attendance
  • Title IV aid that could have been disbursed
  • Period of enrollment example
  • Post-withdrawal disbursements
  • Percentage of Title IV aid earned
  • Return of funds


Dear Colleague:

This is the first in a series of Dear Colleague letters that we are issuing to provide additional guidance on the "Return of Title IV Aid" requirements found in section 484B of the Higher Education Act of 1965, as amended (HEA) and 668.22 of the Student Assistance General Provisions regulations. The Return of Title IV Aid requirements were added to the HEA by the Higher Education Amendments of 1998 (Public Law 105-244, enacted October 7, 1998).

These requirements prescribe how Title IV funds must be treated when a Title IV recipient withdraws from an institution without completing the payment period or period of enrollment. We urge you to review earlier guidance that we have provided on this subject, including:

  • Dear Colleague Letter GEN-98-28;
  • The preamble to the Notice of Proposed Rulemaking (64 FR 43024, published on August 6, 1999);
  • The preamble to the Final Regulations (64 FR 59016, published on November 1, 1999); and
  • Chapter 6 of Volume 2, "Institutional Eligibility and Participation" of the 2000-2001 Student Financial Aid (SFA) Handbook.


All of these references can be found on our Information for Financial Aid Professionals website at http://ifap.ed.gov.

If you have questions on any of the information contained in this letter, please contact the SFA Customer Service Call Center. Staff is available Monday through Friday between the hours of 9:00 AM and 5:00 PM (Eastern Time) at 1-800-433-7327. After hours, calls will be accepted by an automated voice response system. Callers leaving their name and phone number will receive a return call the next business day. You may also FAX an inquiry to the Customer Service Call Center at (202) 260-4199, or e-mail one to sfa_customer_support@ed.gov.

Sincerely,

Daniel T. Madzelan, Chief

Jeff Baker, Director

Forecasting and Policy Analysis Unit

Program Development Division

Office of Postsecondary Education

Student Financial Assistance

 

Guidance on the Return of Title IV Aid Provisions--Volume #1


Applicability of the Return of Title IV Aid requirements when a student is not charged by the institution

Q1. If a student withdraws and the institution decides to not assess any charges to the student, do the Return of Title IV Aid requirements apply? Does it matter why the student was not charged (e.g., because the institution retroactively withdrew the student, or to comply with the institution's refund policy)?

A1. Yes, the Return of Title IV Aid requirements apply when a student withdraws even if the institution decides to not assess any charges to the student. Any otherwise eligible student who began attendance at an institution and was disbursed or could have been disbursed Title IV grant or loan funds prior to a withdrawal has earned a portion of those Title IV funds (668.22(a) and 668.22(l)(4)). The adjustment or elimination of a student's institutional charges, changes to the student's enrollment status, or other administrative determinations made by the institution after the withdrawal have no bearing on the applicability of the requirements in 668.22, including the requirement that the institution use in the calculation the amount of the originally assessed institutional charges (see Question #2).

However, if the student never actually began attendance for the payment period or period of enrollment, as applicable, an institution must handle any Title IV funds in accordance with the requirements of 34 CFR 668.21, 682.604(d)(3) or (4), and 685.303(b)(3), as applicable, rather than 34 CFR 668.22. If a student began attendance, but was not and could not have been disbursed Title IV grant or loan funds prior to withdrawal, the student is not considered to have been a Title IV recipient and the requirements of 668.22 do not apply.

Institutional charges

Q2. If, after a student withdraws, the institution changes the amount of institutional charges it assessed the student or does not assess any institutional charges to the student, what is the amount of institutional charges that should be used in determining the amount of any unearned Title IV funds that the institution is responsible for returning?

A2. The institutional charges used in the calculation are always the institutional charges that were initially assessed the student for the payment period or period of enrollment, unless the institution adjusted the student's institutional charges prior to the student's withdrawal (for example, for a change in enrollment status) (668.22(g)(1)(ii) and (2)).

Because Title IV aid is provided for the entire payment period or period of enrollment, as applicable, the calculation uses institutional charges assessed for that entire payment period or period of enrollment. An institution may not use the unpaid charges on the student's account at the time of withdrawal or the adjusted amount of institutional charges that results from the institution's refund policy or from a "retroactive withdrawal" of the student.

If an institution adjusted a student's institutional charges (for example, for a change in enrollment status) prior to the student's withdrawal, that adjusted amount of institutional charges is used. If an institution did not process an adjustment to a student's institutional charges before the withdrawal, the institutional charges must reflect the amount initially assessed.

Q3. If an institution waives some or all tuition and fee costs for certain students, do institutional charges exclude those waived charges when a student withdraws?

A3. The treatment of a waiver of tuition and fees under the Return of Title IV Aid requirements must be consistent with the required treatment of the waiver for purposes of calculating the student's cost of attendance for Title IV aid purposes.

An institution may only include a tuition and fee charge in the cost of attendance (COA) if that charge is actually made to the student and is paid by the student or on behalf of the student, including by some form of student financial assistance. A good measure for determining if the charges should be used for all Title IV purposes is for the institution to determine if the student would be required to pay the charges if another source does not pay on behalf of the student. An audit trail must show that actual funds were used to pay all tuition and fee charges. The amount due may not be "written off."

If the institution treats a waiver as a payment of tuition and fees actually charged to a student, then that payment would be considered to be a financial aid resource and the COA calculation would include the full amount of the tuition and fees. Any Return of Title IV Aid calculation would also be based on the full original charge for the tuition and fees for the period used in the calculation. For example, an institution charges all state residents $900 per semester. Out of state students are charged an additional $2,000 for a total of $2,900. However, the institution grants waivers of the out-of-state charges to some out-of-state athletes. If the institution treats this waiver as a payment, the full charges to an out-of-state student who received a waiver would be $2,900, and would be included in the COA. The waiver would be considered a payment to those charges and a subsequent transaction would need to show the application of the waiver funds of $2,000 to the student's account. Institutional charges for any Return of Title IV Aid calculation would be the original $2,900 amount.

On the other hand, if the institution's policy for these "waivers" is that the student was never actually assessed the higher amount and the waiver is not considered to be financial aid, only the actually assessed charges would be used for COA and Return of Title IV Aid purposes. In the example, the full charges to an out-of-State student who receives a waiver would be $900 because the $2,000 charge does not exist for that student. Any Return of Title IV Aid calculation would use institutional charges of $900.

Withdrawals from standard term-based programs using modules

Q4. How are the Return of Title IV Aid requirements applied when a student withdraws from a standard term-based program comprised of a series of modules?

A4. The following guidance applies to programs that have these characteristics:

Some or all of the courses in the program are offered in modules, i.e., sequentially, rather than
concurrently. The modules may overlap.
The institution has chosen to have two or more modules make up the standard term (semester,
trimester, or quarter). For example, in each 15-week semester, courses are offered in three five-week modules.
Students can begin attendance at the beginning of any one of the modules in a term. For example, a student
enrolling in a three module per semester program can start in module two or three as well as in module one.
Students may skip one or more modules within the term. For example, a student enrolling in a
three module per semester program can attend module one and then not continue until module three.
Students enroll up-front for courses in all of the modules they plan to attend for the entire term;
however, some students may subsequently add or drop a course in a later module.

The following principles apply to the application of the Return of Title IV Aid provisions to programs offered in modules during standard terms:

PRINCIPLE #1

If a student withdraws from an institution after completing at least one course in one module within the term, the student is not considered to have withdrawn and the requirements of 668.22 for the Return of Title IV Aid do not apply. However, other regulatory provisions concerning recalculation may apply.

For example, if a student completes a course in the first module and then withdraws after two weeks of attendance in the second module, the student is not considered to have withdrawn. This principle is based on the concept that at a traditional term-based institution where a student takes courses concurrently, if the student completes at least one course but drops all others, that student would not be considered to have withdrawn. Other Title IV provisions may apply, such as the requirement under the Federal Pell Grant Program to recalculate the Pell Grant award.

If the student's eligibility for and disbursement of Title IV aid was based upon credit hours that the student failed to enroll in and/or attend, the institution would be required to recalculate any Federal Pell Grant award in accordance with 690.80(b)(2)(ii) because the student failed to begin attendance in the required number of credit hours for which the Federal Pell Grant was awarded. The institution would also be required to recalculate the student's eligibility for any campus-based aid that had been awarded in order to eliminate living expenses for periods of non-attendance. Such recalculations would also need to include a revision of the student's cost of attendance in the event institutional charges were changed as a result of the reduced enrollment. A change in enrollment status to less than half-time as a result of the failure to begin attendance in all subsequent modules would not affect a student's eligibility to for any loan Direct Loan or FFEL program funds previously received.

PRINCIPLE # 2

If a student withdraws from the institution before completing at least one course in one module, the student is considered to have withdrawn and the requirements of 668.22 for the Return of Title IV Aid apply unless the institution has obtained a confirmation from the student that the student intends to continue in the program and attend a module later in the term (see Principle #4).

This is the converse of Principle # 1, and it is also consistent with what would be the case if the student were attending class in a more traditional standard term setting.

PRINCIPLE # 3

When a student withdraws without completing at least one course in one module, the payment period to be used in the Return of Title IV Aid calculation (668.22(e)(5)(i)) includes all of the modules that the student was scheduled to attend in the term, beginning with the module which included the student's first day of attendance for the term.

For example, if a student enrolls in only the second and third modules of a three module term where each module consists of 35 days (five weeks), the student's payment period for Return of Title IV Aid purposes would consist of only the 70 days in modules two and three. The percentage of the payment period completed (which is also the percentage of Title IV aid earned), is determined by calculating the number of days completed in the payment period over the total days in the payment period. So, if a student in this example who enrolled in only modules two and three begins module two and completes 21 days before withdrawing, the percentage of the payment period completed would be 30% (21 days completed over 70 days in the student's payment period).

PRINCIPLE # 4

A student who has not completed at least one course in the payment period does not have to be considered to have withdrawn if the institution has obtained a confirmation from the student that the student intends to continue in the program and attend a module later in the term.

The confirmation from the student must be obtained subsequent to withdrawal. An institution may not rely upon the student's previous registration. If a student indicates an intention to continue in a subsequent module in the term but does not return for a subsequent module, the student would be considered to have withdrawn. The withdrawal date would be the withdrawal date that would have applied if the student had not indicated an intention to attend a module later in the term. If a student who ceases attendance during the first module in the term that the student was scheduled to attend is not scheduled to attend any more modules in the same term, the student would be considered a withdrawal.

Withdrawal date--Institutions that are not required to take attendance

Q5. What is the withdrawal date for Return of Title IV Aid purposes when a student informs the office designated by the institution to administer withdrawals of his or her intention to withdraw on a later date?

A5. The withdrawal date would be the date that the student came into the office and stated his or her intention to withdraw. The withdrawal date for a student who otherwise provides official notification to the institution of his or her intent to withdraw is the date of the student's notification (668.22(c)(1)(ii)). For example, if on October 13 a student informs the designated office of his or her intent to withdraw on October 16, the withdrawal date would be October 13. However, an institution does have the option of using another date if it has evidence of attendance by the student at an academically-related activity on that date (668.22(c)(3)). Self reporting by the student of attendance at the event is not satisfactory. Although an institution may find it useful to use a withdrawal date or last date of academic attendance provided by a student to assist in determining a last date of attendance at an academically-related activity, the institution must document that the activity is academically-related and that the student attended the event.

Q6. How specific does an institution have to be when specifying which office or offices students have to contact to provide official notification of withdrawal? For example, do office hours have to be included?

A6. An institution that is not required to take attendance must designate one or more offices at the institution that a student may readily contact to provide official notification of withdrawal (668.22(c)(5)(ii)). The information to students must be specific enough for a student to be able to readily locate the designated office in order to provide notification. Providing office hours would be a good way to demonstrate that a student can "readily" contact the office.

Q7. If a student provides official notification of withdrawal to the institution by sending a letter to the designated office stating his or her intent to withdraw, would the withdrawal date be the date on the letter, the postmark date, or the date the institution received the letter?

A7. The withdrawal date would be the date that the institution receives the letter. Notification is not provided to an institution until the institution receives the notification. An institution has the option of using another date if it has evidence of an academically-related activity which the student attended on that date (668.22(c)(3)).

Q8. An institution designates more than one office where a student can provide official intent to withdraw. If a student informs one of the designated offices of his or her intent to withdraw on one day and several days later actually begins the institution's withdrawal process at another of the designated offices, which date should be considered the withdrawal date for Return of Title IV Aid purposes? Can another date be used for institutional, state, or accrediting agency refund purposes?

A8. An institution must designate one or more offices that a student may contact to provide official notification of withdrawal (668.22(c)(5)(ii)). When a student both provides official notification of intent to withdraw and begins the institution's withdrawal process on different days, the withdrawal date is the earlier of the two dates, unless the institution chooses to document a last date of attendance at an academically-related activity (668.22(c)(2)(ii)).

For example, an institution has designated both the financial aid office and the registrar's office as the offices that a student may contact to provide official notification of withdrawal. The student notifies the financial aid office of intent to withdraw on October 27. The student then begins the institution's withdrawal process at the registrar's office on October 31. The student has provided official notification of intent to withdraw to a designated office on October 27. Because the student otherwise provided official notification prior to beginning the institution's withdrawal process, the withdrawal date is the date the student otherwise provided official notification, October 27. This withdrawal date, October 27, must be used for all Title IV purposes, including reporting the withdrawal date to a lender under the FFEL Program or the Direct Loan Program. An institution may use a different withdrawal date, such as the October 31 date, for non-Title IV purposes.

Q9. What is a student's withdrawal date if the student officially withdraws while on a scheduled break?

A9. If a student officially withdraws while on a scheduled break of five consecutive days or more, the withdrawal date is the last date of scheduled class attendance. For example, the institution's last date of scheduled class attendance prior to Spring break is Friday, March 7. Spring break at the institution runs from Saturday, March 8 to Sunday, March 16. If the student contacts the institution's designated office on Wednesday, March 12 to inform the institution that he will not be returning from the institution's Spring break, the student's withdrawal date is Friday, March 7, which was the institution's last day of scheduled class attendance. However, the date of the institution's determination that the student withdrew is March 12, the date the student actually informed the institution that he would not be returning. The date of the institution's determination that the student withdrew (668.22(l)(3)) is used as the starting date for required timeframes for institutional action, such as the requirement that an institution return Title IV funds for which it is responsible no later than 30 days after this date.

If a student officially withdraws while on a scheduled break of less than five days, the actual date of the student's notification to the institution is the student's withdrawal date. Remember that an institution may always choose to use a documented last date of attendance at an academically-related activity as the student's withdrawal date.

Withdrawal date--institutions that are required to take attendance

Q10. The preamble to the November 1, 1999 final regulations on the Return of Title IV Aid stated that an institution would be considered to be required to take attendance if any requirements of an outside entity result in the institution having to take attendance, even if attendance taking is not directly required. Is a statement by an outside entity that the requirements it places on an institution do not require the institution to take attendance sufficient to demonstrate that the institution is not required to take attendance by the outside entity?

A10. Not necessarily. The regulations provide that the withdrawal date for students who withdraw from an institution that is required to take attendance is the student's last date of academic attendance as determined by the institution from its attendance records. An institution is "required to take attendance" if the institution is required to take attendance for some or all of its students by an entity outside of the institution. If an outside entity requires an institution to take attendance for only some students, the institution is required to use attendance records to determine a withdrawal date for only those students (668.22(b)(1) and (b)(3)).

If any requirements of an outside entity result in an institution having to take attendance, the institution would be considered to be an institution that is required to take attendance for purposes of the Return of Title IV Aid requirements, even if the outside entity states that the institution is not required to take attendance. In other words, if the only way an institution can comply with a requirement of an outside entity is to take attendance, the institution is considered to be an institution that is required to take attendance for Return of Title IV Aid purposes. For example, if the only way that an institution could comply with a requirement of its accrediting agency to monitor the withdrawal date of its students is for the institution to take attendance, the institution would be considered to be required to take attendance even though the accrediting agency did not use words that specifically stated that the institution is required to take attendance. This would be true even if the accrediting agency specifically included language that said that the institution is not required to take attendance.

In response to commenters' specific examples, the Department stated in the preamble to the November 1, 1999 final regulations that if, for example, a state agency requires the institution to refund tuition and fees based on the student's last date of class attendance or the state agency regulations require the institution to drop a student if the student misses more than a certain number of days or hours in a term, the institution would be considered an institution that is required to take attendance for purposes of determining a student's withdrawal date. Again, although an outside entity may state that the entity's requirements do not require institutions to take attendance, if that is the only way that an institution may comply with the requirements of the entity, the institution is considered to be required to take attendance for purposes of the Return of Title IV Aid requirements in 668.22.

It is our belief that the goal of the Return of Title IV Aid provisions is to identify the date that most accurately reflects the point when a student ceases academic attendance, not the date that will maximize Title IV aid to the institution or to the student. Generally, the most exact determination of a student's withdrawal date is one that is made from institutional attendance records. If an institution has such records as the result of the requirements of an outside entity, the institution must use those records for determining a student's withdrawal date.

Title IV aid that could have been disbursed

Q11. Does an undisbursed second or subsequent disbursement of a Direct or FFEL loan within a loan period count as aid that could have been disbursed when calculating the treatment of Title IV funds when a student withdraws?

A11. Note that the following is a change in policy. Our prior guidance provided that the amount of Title IV funds that could have been disbursed did not include second or subsequent disbursements of FFEL or Direct Loans for students who withdrew. This guidance cited the prohibition in 668.164(g)(2)(ii)(A) and (B) on making second and subsequent disbursements of FFEL or Direct Loans unless the student has graduated or successfully completed the period of enrollment for which the loan was intended. Upon further consideration, we have changed the guidance for the treatment of second and subsequent disbursements of FFEL and Direct Loans for students who withdraw as follows:

There are two general principles for the treatment of second and subsequent disbursements of FFEL or Direct Loans in Return of Title IV Aid calculations:

Principle #1: A second or subsequent FFEL or Direct Loan disbursement is counted as aid that could have been disbursed for purposes of determining earned Title IV aid if the institution would not have been prohibited from making the disbursement on or before the day the student withdrew (for example, if the loan was not disbursed because the institution chose to release loan funds in installments during the term, or if expected funds were not provided by the lender before the student's withdrawal).

Principle #2: A student can never receive as a post-withdrawal disbursement any amount of a second or subsequent FFEL or Direct Loan disbursement.

Although Principle #1 is distinctly different from Principle #2, they are not inconsistent. Principle #1 permits an institution to include in the calculation amounts of any second or subsequent disbursement that the institution could legally have made on or before the student withdrew, but did not. For example, a student completed 500 clock hours in a 900 clock hour program and passed the midpoint in calendar time of the loan period. The loan period is the 900 clock hour academic year. The payment periods are 450 hours each. The student was disbursed half of the Stafford loan at the beginning of the first payment period and was scheduled to receive the other half in the second payment period. Although the student had completed half of the clock hours and passed the midpoint in calendar time of the loan period, making the student eligible to receive the second installment of the loan, the second disbursement of the loan was not disbursed before the student withdrew. Because the institution was not prohibited from making the second disbursement on or before the day the student withdrew (because the student had completed the first payment period), the second disbursement of the loan is included as aid that could have been disbursed in the calculation of earned Title IV aid.

Principle #2 reflects the statutory prohibition on the making of second or subsequent disbursements of FFEL or Direct Loans when a student has ceased attending an institution without completing the loan period. Aid that "could have been disbursed" is defined as aid that was not disbursed, but meets the requirements for late disbursements in 668.164(g). Among the late disbursement requirements in 668.164(g)(2)(ii)(A) and (B) are those that implement the statutory prohibition that an institution may not make a second or subsequent disbursement of a FFEL or Direct Stafford Loan unless the student has graduated or successfully completed the period of enrollment for which the loan was intended. The Return of Title IV Aid requirements, including the post-withdrawal disbursement requirements, do not supercede this provision. Therefore, when a student withdraws, no portion of any second or subsequent disbursement may be disbursed to a student as a post-withdrawal disbursement even though the amount of the second or subsequent disbursement is included as aid that could have been disbursed for purposes of determining earned Title IV funds.

For example, a student has completed 350 clock hours in a 900 clock hour program. The loan period is the 900 clock hour academic year. The payment periods are 450 hours each. The institution chooses to disburse the loan in four disbursements. The student has been disbursed the first quarter of the Stafford loan for the first quarter of the period of enrollment and is scheduled to receive the second quarter of the loan in the second half of the first 450 hour payment period. The student withdraws in the first payment period after receiving only the first disbursement of the loan. The third and fourth scheduled disbursements of the loan may not be included in the calculation as aid that could have been disbursed because the student had not completed half of the clock hours in the loan period. The second scheduled disbursement of the loan is included in the calculation as aid that could have been disbursed because the institution was not prohibited from disbursing that amount to the student on or before the day the student withdrew. However, the institution may not make a post-withdrawal disbursement from the second scheduled disbursement of the loan because of the prohibition on making second or subsequent disbursements of FFEL or Direct Stafford loans when a student has ceased attending an institution.

Q12. If an institution is exempt from the 30-day delayed disbursement requirements for first installments of Stafford Loans under the FFEL and Direct Loan programs to first-time, first-year undergraduate students because it has a low default rate, but it chooses to retain the practice anyway, would that first installment of aid count as "aid that could have been disbursed"? Likewise, if an institution that is exempt from making multiple disbursements of a one term FFEL or Direct Loan because it has a low default rate chooses to make multiple disbursements and the student withdraws after the first disbursement but prior to any subsequent disbursement(s), may the subsequent disbursement(s) be included as aid that could have been disbursed? Can such loan funds be disbursed to a student if a post-withdrawal disbursement is due?

A12. In both cases, because the institution is exempt from the 30-day delayed disbursement requirement (682.604(c)(5)(i) or 685.303(b)(4)(i)) and certain multiple disbursement requirements (682.604(c)(10) and 685.301(b)(8)(i)), the unmade disbursements are included as aid that could have been disbursed for purposes of calculating the amount of earned Title IV aid because the institution could have made the disbursement on or before the day the student withdrew (see Question 11).

If the institution is exempt from the 30-day delayed disbursement requirement but has chosen to delay disbursement, the amount of this disbursement may also be used to make a post-withdrawal disbursement because the disbursement would be the first disbursement of the loan. However, in the case of an institution that is exempt from making multiple disbursements of an FFEL or Direct Loan but chooses to make multiple disbursements, the scheduled disbursements may not be made as a post-withdrawal disbursement because, as discussed previously, no portion of a second or subsequent disbursement may ever be disbursed to a student as a post-withdrawal disbursement (see Question 11).

Period of enrollment example

Q13. Would you please provide an example of a determination of the treatment of Title IV funds calculation that is done on a period of enrollment basis, rather than a payment period basis?

A13. Although the example provided below is for a clock hour institution that chooses to use period of enrollment rather than payment period for calculations under the Return of Title IV Aid requirements, it also includes a discussion of several provisions of the Return of Title IV Aid requirements. They include:
The use of scheduled hours completed as compared to actual hours completed.
The use of net loan proceeds disbursed rather than the gross amount of the loan disbursement
under the FFEL and Direct Loan programs.
A calculation that results in the requirement for a post-withdrawal disbursement.

See the attached worksheet to view the actual steps of the computation.

A student enrolls in a 1500 clock hour program with a 900 clock hour academic year. The financial aid package for the first 900 clock hours (which is the period of enrollment) comprises a $1,400 Pell Grant and a $2,625 Subsidized FFEL or Direct Loan. For each 450 clock hour payment period, the student is scheduled to receive a $700 Pell Grant disbursement and a net loan disbursement of $1,260 (the $1,312.50 loan disbursement less approximately 4% for loan fees).

The student withdraws after completing 500 clock hours of the academic year, although as of the date of withdrawal the student was scheduled to have completed 650 clock hours. When the student withdrew, he had received the first scheduled disbursements of the Pell Grant and loan, but had not yet received any disbursement for the second half of the period of enrollment. The student's total Title IV aid disbursed is $1,960 ($700 Pell Grant plus $1,260 Subsidized FFEL or Direct Loan). In order for any of the undisbursed aid to be counted as aid that could have been disbursed, the requirements for a late disbursement in 668.164(g) must be met. The student's valid ISIR has already been received, so the undisbursed Pell Grant funds are included as aid that could have been disbursed because the student had met the Pell Grant requirement that he or she had completed the payment period for which Pell funds had been disbursed (at least one-half of the academic year).

The student's loan application has been certified and the student has completed the first payment period, so the second disbursement of the loan is included in the calculation of earned Title IV aid. In this example, the total of the Title IV aid that was disbursed plus the Title IV aid that could have been disbursed for the entire 900 hour period of enrollment is $3,920 ($1,400 Pell Grant plus $2,520 Subsidized FFEL or Direct Loan).

The student has actually completed 55.6% of the total hours in the period of enrollment (500 hours divided by 900 hours). However, because the 500 completed hours is equal to 76.9% of the hours the student was scheduled to complete as of the withdrawal, the scheduled hours are used instead of actual completed hours to determine the percentage of the period of enrollment completed (if the percentage of hours completed is at least 70 percent of the hours scheduled the scheduled hours are used). Thus 72.2% (650 hours divided by 900 hours) is the percentage of the period of enrollment completed and the percentage of Title IV aid that was earned. Note that the concept of a student earning 100% of the Title IV aid if the percentage completed exceeds 60% does not apply if scheduled hours are used.

The amount of Title IV Aid earned by the student is $2,830.24 (72.2% of $3,920). The student had been disbursed $1,960 of the $2,830.24, so he is owed a post-withdrawal disbursement of $870.24. A post-withdrawal disbursement must be made first from any available grant funds. The student had $700 in Pell Grant funds that had not, but could have been disbursed, so the entire $700 is used for the post-withdrawal disbursement. The student is still owed $170.24 in a post-withdrawal disbursement. However, the late disbursement rules provide that the student may not receive a late second or subsequent disbursement of the loan unless the student has graduated or successfully completed the period of enrollment for which the loan was intended (see Question #11). So, although the second scheduled loan disbursement of $1,260 was included in the calculation of earned aid, the student cannot receive any of those funds. Therefore, the actual amount of the student's post-withdrawal disbursement is the $700 in Pell Grant funds.

Post-withdrawal disbursements

Q14. The regulations allow an institution to use any funds required to be provided to a student under the post-withdrawal disbursement rules to be used to pay any outstanding charges on the student's account. What amount constitutes "total outstanding charges on the student's account" (box B on the Department's Post-Withdrawal Disbursement Tracking Sheet)?

A14. If a student is owed a post-withdrawal disbursement and outstanding charges exist on the student's account, the institution may credit the student's account with all or a portion of the post-withdrawal disbursement, up to the amount of outstanding charges (668.22(a)(4)(i)(A)). Outstanding charges on a student's account are charges for which the institution will hold the student liable after the application of any applicable refund policy. That is, the amount of institutional charges after any adjustment to reflect what the student will really owe after his or her withdrawal, any other current charges that remain on the student's account, and any permitted minor prior year charges.

For example, a student is due a post-withdrawal disbursement of $450. The institutional charges that the student was originally assessed by the institution totaled $2,300; however, under the institution's refund policy, the institution may only keep $700 of those institutional charges. No funds have been paid toward the institutional charges when the student withdraws. In addition, the student owes $50 for a bus pass. The outstanding charges on the student's account that would be entered in Box B of the Post-Withdrawal Disbursement Tracking Sheet are $750 (the $700 in institutional charges plus the $50 owed for the bus pass). All or a portion of the $450 required under the post-withdrawal disbursement provisions may be used to satisfy this balance. An institution must obtain a student's or parent's authorization to credit a student's account for charges other than current charges for tuition, fees, room and board (if the student contracts with the institution).

Percentage of Title IV aid earned

Q15. Is the day that a student withdraws counted as a completed day when determining calendar days completed for a student who withdraws from a credit hour program?

A15. Yes.

Return of funds

Q16. Is there a de minimus amount that an institution or a student is not required to return to the Title IV programs when a student withdraws?

A16. If a student owes a grant overpayment as a result of a withdrawal, the student does not have to repay the grant overpayment if the total original amount that the student is responsible for repaying is less than $25. The grant overpayment would no longer exist and should not be reported as such.

This is a change from previous policy that held that overpayments were never cancelled no matter how small the amount of the overpayment. An institution should not report overpayment amounts resulting from withdrawals of less than $25 to NSLDS or to SFA's Debt Collection Service. If an institution is currently holding an overpayment resulting from a withdrawal with a total original amount of less than $25, it should delete the overpayment in NSLDS using the instructions provided in Dear Colleague Letter GEN-98-14.

Note that this provision applies only when the original overpayment amount is less than $25. This does not mean that any remaining balance of $25 or more on an overpayment may be written off.

This provision does not apply to funds that an institution is required to return. An institution must return the full amount owed to any Title IV program that the institution is responsible for returning. However, an institution may round an amount to be returned to a Title IV program to the nearest dollar, so an institution would not have to return amounts less than fifty cents.

Q17. If the institution chooses to return all or a portion of a grant overpayment that otherwise would be the responsibility of the student to return, does the 50 percent grant protection apply?

A17. The 50 percent reduction (668.22(h)(3)(ii)) always applies to the repayment of grant funds for which the student is responsible, regardless of who actually returns the funds. If an institution returns a grant overpayment for a student, the student would no longer be considered to have an overpayment and as such no reporting to either NSLDS or to SFA's Debt Collection Service is required. This would be true whether the institution decided to simply repay for the student or turn the overpayment into an institutional debt.

Q18. If an institution chooses to pay a grant overpayment on behalf of the student who withdrew and the student then decides to not repay the institution, can the debt be referred to the Department?

A18. No. Once the overpayment has been repaid by the institution there is no Title IV overpayment. The institution may collect the amount paid by the institution from the student, but the student would not owe a Title IV overpayment.

Attachments/Enclosures:

Period of Enrollment Example Worksheet