Return of Title IV Funds

On November 1, 1999, the Department of Education (ED) issued final regulations to implement the Return of Title IV funds provisions enacted in the 1998 Reauthorization of the Higher Education Act of 1965, as amended (HEA).

According to the preamble of the final regulations, the Return of Title IV funds provisions apply to any student who withdraws on or after October 7, 2000 (instead of any student whose period of enrollment begins on or after that date). Institutions may implement the new rules earlier; but if so, must implement them in their entirety. This policy applies to all students (including undergraduates and graduates) during any payment period or period of enrollment.

Prior to the 1998 Reauthorization, section 484B of the HEA required all institutions participating in Title IV programs to use specific refund policies when a student who received Title IV funds ceased attendance at the institution (i.e., Pro Rata, federal, state licensing agency, etc.). Under the 1998 Reauthorization, section 484B does not dictate a refund policy, but instead prescribes steps to follow to determine the amount of Title IV funds a student has earned at the time he or she ceases attendance. The amount earned is based on the amount of time the student has spent in attendance. It has no relationship to the student's institutional charges; rather, it is based on a proportional time calculation through 60 percent of the student's payment period. The new requirements do not prohibit an institution from complying with a refund policy required by an outside agency.

This article and its accompanying two-sided worksheet are intended to help institutions understand and implement the new requirements. There are eight steps to follow:

• Step 1: Collect information about the student's Title IV aid.
• Step 2: Calculate percentage of Title IV aid earned by the student.
• Step 3: Calculate amount of Title IV aid earned by the student.
• Step 4: Determine if the student is due post-withdrawal disbursement or if Title IV aid must be returned.
• Step 5: Calculate amount of unearned Title IV aid due from the institution.
• Step 6: Determine allocation of funds returned by institution.
• Step 7: Calculate initial amount of unearned Title IV aid due from student.
• Step 8: Determine allocation of funds returned by student.

Please consult the accompanying worksheet when reviewing these steps. (Click here for worksheet, available as an 11k Adobe PDF document.)

First determine the net amounts of Title IV funds disbursed and the amounts that could have been disbursed. Break these amounts into the Title IV program source. When determining the amount of Title IV funds that could have been disbursed, include only those monies that the student was eligible to receive during the payment period or period of enrollment in which he or she withdrew, and ensure that late disbursement provisions are not violated.

The Return of Title IV requirements pertain to students who are recipients only of funds that are clearly Title IV grant or loan funds (Federal Work-Study funds earned by the student are excluded from the calculation). Therefore, the final regulations exclude from the calculation the non-federal share of FSEOG awards when an institution meets its FSEOG matching share by either the individual recipient method or the aggregate method. If your institution meets its matching share requirement by putting funds in the FSEOG fund (otherwise known as the fund-specific matching method), include those funds in the calculation.

In order to complete this section, determine the student's withdrawal date. This determination differs for institutions required to take attendance and institutions not required to take attendance.

If your institution is required to take attendance, divide the number of days/hours in the payment period or period of enrollment by the number of days/hours completed by the student through his or her last date of attendance. Clock hour institutions may use scheduled hours completed by the student only if the student attended at least 70 percent of the scheduled hours; otherwise, use actual hours completed (attended) by the student.

If your institution is not required to take attendance, divide the number of days in the payment period or period of enrollment by the number of days completed by the student through his or her withdrawal date.* The student's withdrawal date at such institutions is defined as:

• The date on which the student began the withdrawal process or the date on which the student otherwise provided official notice, whichever is earlier; or
• The midpoint of the enrollment period, if the student failed to notify the institution of withdrawal; or
• If a student withdraws but does not notify the school because of circumstances beyond his or her control, the date related to that circumstance; or
• If the student didn't return from an approved leave of absence, the date the institution determines that leave began; or
• The date of the student's last attendance at a documented academically-related activity.

Do not include scheduled breaks of five days or more or the time students spend on an approved leave of absence in the calculations. The 60 percent threshold cannot be reached by rounding up. If the percentage calculated exceeds 60 percent, the percentage earned is 100 percent.

Multiply the percentage figure calculated in Step 2 by the amount of Title IV funds that were disbursed and could have been disbursed.

Subtract the Title IV aid actually disbursed from the amount of Title IV aid earned. Determine if the student is due a post-withdrawal disbursement or if unearned monies will have to be returned. If no post-withdrawal disbursement is due, loans that could have been disbursed must be cancelled.

If the student is due a post-withdrawal disbursement, the disbursement must be made from available grant funds before available loan funds. Also, the disbursement must be made within 90 days of the institution's determination that the student withdrew. After the eligible post-withdrawal disbursements are credited to the student's outstanding current period charges, the institution must follow specific steps in offering the remaining balance to the student. These steps are found in 34 CFR 668.22(a)(4)(ii). Once all post-withdrawal monies have been properly disbursed, the refund calculation is concluded.

If your institution determines that Title IV funds must be returned, continue with Step 5.

First calculate the amount of institutional charges that the student incurred for the payment period or period of enrollment. These charges may include tuition and fees, room and board, and books and supplies if these books and supplies must be purchased from the school.

Once the amount of institutional charges is calculated, multiply the figure by the percentage of Title IV aid unearned (derived by subtracting the Step 2 figure from 100 percent). The institution is then responsible for returning the lesser of the amounts calculated in Step 4 and Step 5.

Repay the funds to the following sources, in order, up to the total net amount disbursed from each source:

• Unsubsidized FFEL/Direct Stafford Loans;
• Subsidized FFEL/Direct Stafford Loans;
• Perkins Loans;
• FFEL/Direct PLUS Loans;
• Federal Pell Grant;
• Federal SEOG;
• Other Title IV assistance (not including FWS).

Return Title IV funds no later than 30 days after determining that the student has withdrawn.

Determine if the student is responsible for returning unearned Title IV funds (only when the amount of Title IV aid to be returned is greater than the amount of Title IV aid due from the institution).

If the student must return additional funds, the funds must be repaid in the same order as described in Step 6. Specific rules apply to the student's responsibility to return Title IV funds.

Amounts that the student is required to return to the federal loan programs must be returned (repaid) in accordance with the terms of the promissory note (no further action by the institution is necessary). To determine actual amounts that the student is required to return to the federal grant programs, multiply the amount by 50 percent.

A student who fails to return the required Title IV funds loses eligibility for future Title IV aid until he or she repays the amount in full, makes satisfactory arrangements with the institution to repay the funds, or makes satisfactory repayment arrangements with ED.

Federal Regulations effective July 1, 2000, also require that, upon request, an institution make readily available to enrolled and prospective students a summary of the requirements for the return of Title IV funds.

TG will conduct a training session on the Return of Title IV funds at the TG Annual Conference in April. The session will include case studies and examples.

For questions about the return of Title IV funds, contact Customer Services at (800) 252-9743, ext. 4444 or by at customer.services@tgslc.org.

*Note: This sentence has been revised in the HTML version of this issue of Shoptalk. For an explanation of the edit, see the October 2000 Shoptalk.

Back to Top