Federal Updates

R2T4 playbook: Strategies for a winning calculation

Do the rules for the Return of Title IV Funds (R2T4) process make about as much sense to you as the rules for the Bowl Championship Series selection system? TG believes that ensuring that your school is in compliance with federal R2T4 regulations should not feel like a contact sport. In this article we will tackle some of the more common R2T4 issues to help keep your team on the right track.

Pre-game planning

When is R2T4 applicable?

R2T4 is applicable to students who begin and then cease attendance in all classes prior to the scheduled end of the payment period or period of enrollment. Remember, R2T4 requirements do not apply to a student who does not actually cease attendance at the school, nor do they apply to a student who never begins attendance. In that case, however, the school does have other responsibilities in returning disbursed funds, which vary depending on the type of aid; see the 2008-09 Federal Student Aid Handbook (FSA Handbook), page 5-11, for details. For a student who withdraws after the 60 percent point in the payment period or period of enrollment, there are no unearned funds; but the school must still complete the R2T4 calculation in order to determine whether the student is eligible for a post-withdrawal disbursement.

The R2T4 regulations do not prohibit a school from developing its own refund policy; and although a school, state, or agency refund policy may determine the charges a student will owe after withdrawing, those policies will not affect the amount of Title IV aid the student has earned under the R2T4 calculation.

Fumbling the ball

What if a student fails to earn a passing grade in any class?

A school must have a procedure for determining whether a Title IV aid recipient who began attendance during a period completed the period or should be treated as a withdrawal. If a student who began attendance and has not officially withdrawn fails to earn a passing grade in at least one course offered over an entire period, the school must assume, for Title IV purposes, that the student has unofficially withdrawn, unless the school can document that the student completed the period. In other words, if a student completed the payment period or period of enrollment and truly "earned" her failing grades, the R2T4 calculation would not be required.

When a student unofficially withdraws from a school that is not required to take attendance, the school may use either the student's last date of attendance at an academically-related activity, or the midpoint of the period as the student's withdrawal date.

The FSA Handbook (page 5-73) provides a list of examples of academically-related activities, which include:

• Examinations or quizzes
• Tutorials
• Computer-assisted instruction
• Academic advising or counseling
• Academic conferences
• Completing an academic assignment, paper, or project
• Attending a study group required by the institution where attendance is taken

The false start

If a student withdraws before the school's census date, does the school have to perform the R2T4 calculation? What if the student begins attendance, but the school retroactively withdraws him to a date prior to the beginning of the payment period or period of enrollment, and provides the student a 100 percent refund of institutional charges — does the school still have to complete the R2T4 calculation?

A student begins earning Title IV funds on his or her first day of attendance. Therefore, even if a student withdraws before a school's census date, the school must perform the R2T4 calculation using the number of days the student attended, or the number of scheduled clock hours the student attended class. (FSA Handbook, page 5-24)

In the case of a student who begins attendance, but is granted a retroactive withdrawal and receives a refund from the school, the school must perform the R2T4 calculation because the student did attend during the payment period or period of enrollment. The FSA Handbook (page 5-96) describes how to treat a post-withdrawal reduction in charges in the R2T4 calculation:

"If a student withdraws and as a result of applying an institutional refund policy, the school reverses, reduces, or cancels a student's charges, the Return requirements still apply. The statute mandates that an otherwise eligible student who begins attendance at a school and is disbursed or could have been disbursed Title IV grant or loan funds prior to a withdrawal earns a portion of those Title IV funds. If as a result of the withdrawal, an institution adjusts or eliminates a student's institutional charges, or changes a student's enrollment status, the changes made by the institution have no bearing on the applicability of the requirements in 34 CFR 668.22 [the regulations regarding R2T4]. Moreover, the charges used in the Return calculation are always the charges on the student's account prior to withdrawal. However, if a student's enrollment status changed prior to and unrelated to the withdrawal, the effect of that change on institutional charges appropriately should be reflected in any Return calculation."

Regaining possession of the ball

When a student withdraws and the R2T4 calculation indicates that a portion of his Stafford loan must be returned, does the school have to return the funds, leaving the school with a balance due from the student?

If the student receives more Title IV aid than the amount earned, the school, the student, or both, must return the unearned funds in a specified order. If, as a result of the R2T4 calculation, the school is responsible for returning loan funds to a lender, it may then collect those funds from the student. If the student is responsible for returning loan funds, the student does not have to repay the funds immediately, but may instead repay them according to the terms of the promissory note. (FSA Handbook, pages 5-97 through 5-98)

Calling a timeout

If a student attends part of a nonterm program payment period and withdraws, but reenters within a short time, continues, and then withdraws again, how should the school perform the student's R2T4 calculation?

Per the FSA Handbook, page 5-48, "For credit-hour nonterm-based programs or programs that measure progress in clock hours, a student who withdraws and then re-enters the same program at the same school within 180 days is considered to be in the same payment period he or she was in at the time of the withdrawal. The student retains his or her original eligibility for that payment period, and is treated as though he or she did not cease attendance."

In such a scenario, if a withdrawn student re-enters before the school conducts the R2T4 calculation, the student continues as is and retains eligibility for the aid he was awarded for the payment period.

If the student withdraws again, the school is required to perform the calculation. Page 5-50 of the FSA Handbook provides an example — using clock-hours — of this situation, in which the school "would apply the provisions of the Return regulations using the total number of hours the student completed in the numerator, the full hours in the payment period in the denominator, and then applying that fraction to the total Title IV aid disbursed for the period."

To draw a parallel for a nonterm program: For the numerator, the school uses the total number of days the student completed, that is, the total of the number of days from the first day of class to the first time he withdrew, added to the number of days from the date the student resumed attendance to the second time he withdrew; for the denominator, the school uses the total days in the payment period.

Is it out of bounds?

If we certify a Stafford loan for a student, and he withdraws before the loan is disbursed, do we count the loan as aid that could have been disbursed in the R2T4 calculation?

The loan may be counted as aid that could have been disbursed as long as the loan is certified by the date the student withdraws and the student completes the MPN by the date that the school completes the R2T4 calculation. Depending on the results of the R2T4 calculation, the student may receive all or a portion of the first disbursement of the loan, but not any second or subsequent disbursements, as the student did not complete the period for which the loan was intended.

Additionally, any undisbursed Title IV aid for the period that the school uses as the basis for the R2T4 calculation is counted as aid that could have been disbursed as long as the following conditions were met before the date the student became ineligible (refer to 2008-09 FSA Handbook, page 5-60):

• For all programs except PLUS, ED processed a Student Aid Report (SAR) or Institutional Student Information Record (ISIR) with an official EFC for the student.
• For a Federal Supplemental Educational Opportunity Grant (FSEOG) award, the school made the award to the student.
• For a FFELP or Direct loan, the school certified or originated the loan, as applicable.
• For a Federal Perkins loan, the school made the award to the student.
• For ACG and National SMART Grants, the student was enrolled full time.

More information
R2T4 is discussed in the Higher Education Act and the federal regulations in HEA 484B and 34 CFR 668.22, respectively. The FSA Handbook, Volume 5, Chapters 2 and 3, provides a wealth of information about the R2T4 process, including multiple case studies. If you have questions about R2T4, please contact TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

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Closed school corner

The following table provides a list of newly reported school closures and error corrections from the Postsecondary Educational Participants System (PEPS) and from the December 2008 Closed School Monthly Report supplied by ED. Schools listed are those with which TG has done business or to which TG has otherwise provided services.

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