Review the federal regulations on the return of financial aid

Summary of Sec. 668.21

Treatment of Title IV funds when a student withdraws, drops out, or is expelled before the first day of class

If a student officially withdraws, drops out, or is expelled before the first day of class of a payment period, all funds paid to the student for that payment period for institutional or non-institutional cost under the Federal Pell Grant, and FSEOG (Federal Supplemental Educational Opportunity Grant) programs are an overpayment. If an institution is unable to document the student’s attendance during the payment period, the student meets the drop out definition.

The institution is required to return the overpayment to the respective Title IV or Higher Education Act (HEA) programs in the amount that the student received in each program.

Summary of Sec. 668.22 Treatment of Title IV funds when a student withdraws

General information

When a student who is a recipient of Title IV loan or grant assistance withdraws during a payment period or period of enrollment in which the student began attendance, the institution must determine the amount of Title IV grant or loan assistance earned as of the student’s withdrawal date.

If the total amount of Title IV grants or loans, or both, that the student earned is less than the amount of Title IV grants that was disbursed to the student or on behalf of the student in the case of a parent PLUS loan as of the date of the institution’s determination when the student withdrew, the difference must be returned to the Title IV program. No additional disbursements may be made to the student for the payment period or period of enrollment.

If the total amount of Title IV grants or loans, or both, that the student earned is greater than the total amount of the Title IV grants or loans disburse to the student or on behalf of the student in the case of a parent PLUS loan as of the date of the institution’s determination when the student withdrew, the difference between these amounts must be treated as a post-withdrawal disbursement.

A post-withdrawal disbursement must be made from available grant funds before available loan funds. If outstanding charges exist, the institution may credit the student’s account up to the amount of outstanding charges with all or a portion of any post-disbursement grant funds. Post-disbursement loan funds to pay outstanding charges require the confirmation of the student or parent for a parent PLUS loan.

A post-withdrawal disbursement must be made within 180 days of the date the institution determines that the student withdrew. Indiana University disburses accepted Title IV Financial Aid (student loans) within 45 days of withdrawal as long as the student meets SAP and student eligibility requirements such as completion of MPN and Loan Entrance Counseling.

The institution must notify the student and parent in the case of the parent PLUS loan within 30 days of the institution’s determination that the student withdrew to offer to disburse any grant or loan funds directly to the student or parent in the case of a parent PLUS loan that is not credited to the student’s account. The funds may be accepted or declined. The parent or student has 14 days from the date of notification being sent to respond. With a timely notification from the student or parent in the case of a PLUS loan to confirm a post-withdrawal disbursement, the institution must disburse the funds within 180 days of the institution’s determination that the student withdrew. For a late response from the student or parent in the case of a PLUS loan, the institution may make or decline to make the post-withdrawal disbursement.

For any amount of a post-withdrawal grant disbursement not credited to the student’s account to cover allowable charges, the school must make the disbursement as soon as possible but no later than 45 days after the date of the school’s determination that the student withdrew.

The following programs are defined as Title IV grant or loan assistance:

• Federal Direct Loan (Federal Direct Loans and Direct PLUS loans)
• Federal Pell Grant
• Iraq and Afghanistan Service Grants (IASG)

Federal SEOG (Federal Supplemental Educational Opportunity Grant) programs, not including the non-Federal share of FSEOG awards if an institution meets its FSEOG matching share.

A student is to be considered withdrawn for R2T4 purposes if they are not actively attending a course when they withdraw from a course or set of courses and are not scheduled to attend a future course no more than 45 days from their initial withdrawal date within the active term. A withdrawal exemption is applied to students who successfully complete a module of enrollment that equals 49% or more of the student’s overall intended enrollment or if the student successfully completes coursework equal to or greater than the coursework required for the institution’s definition of a half time student for the payment period.

The withdrawal date for a student who withdraws from an institution that is not required to take attendance (e.g., IU Indianapolis) is the earlier date of:

• the date the student began the institution’s prescribed withdrawal process; or
• the date the student otherwise provided the school with official notification of the intent to withdraw; or
• the date the institution becomes aware the student ceased attendance; or
• the midpoint of the payment period or period of enrollment for which Title IV assistance was disbursed if the student ceases to attend without official notification and withdrawal.

At IU Indianapolis, the office designated for a student notification to withdraw is the Office of the Registrar.

IU Indianapolis does not utilize the process of R2T4 freeze dates. IU Indianapolis monitors student enrollment changes throughout the enrollment period to determine what course days should be included in the student’s withdrawal calculation, if applicable.

Calculate by dividing the total number of calendar days in the payment period into the number of calendar days completed as of the student’s withdrawal date.

Example of R2T4 Calculation

1. IU Indianapolis determines the percentage of Title IV, HEA aid the student earned by taking the calendar days completed in the period of enrollment and dividing by the total calendar days in the period of enrollment (excluding breaks of 5 days or more and days the student was on an approved leave of absence)

Example: (22 completed days) / (114 total days) = 19.3 percent Title Aid Earned

2. IU Indianapolis determines the dollar amount of Title IV aid the student earned by multiplying the percentage of Title IV, HEA aid earned by the total of the Title IV aid disbursed plus the Title IV aid that could have been disbursed for the period of enrollment.

Example: 19.3 percent x ($1849 disbursed + $2721 that could have disbursed) = $882.01 Aid Earned

Calculation of Title IV assistance earned by the student

The percentage of Title IV assistance earned is equal to the percentage of the payment period completed as of the withdrawal date. If the withdrawal date occurs after the 60 percent point, then the percentage of Title IV assistance earned is 100 percent. This percentage is then applied to the total amount of Title IV grant and loan assistance that was disbursed (and that could have been disbursed) to the student, or on the student’s behalf in the case of a parent PLUS loan, for the payment period for which it was awarded.

Calculation of Title IV assistance unearned to be returned

The unearned amount of Title IV assistance to be returned is calculated by subtracting the amount of Title IV assistance earned by the student from the amount of Title IV aid that was disbursed to the student or on behalf of the student in the case of a parent PLUS loan.

Responsibility of the institution for return of unearned aid

The institution must return the lesser of the calculated total amount of unearned Title IV assistance or an amount equal to the total institutional charges the student incurs for the payment period multiplied by the percentage of awarded Title IV grant and loan assistance that has not been earned by the student.

Institutional charges

Institutional charges are tuition, fees, room and board (if the students contracts with the institution for room and board), and other educationally-related expenses assessed by the institution.

Responsibility of the student for return of unearned aid

The student returns unearned Title IV assistance minus the amount the institution returns. Any Title IV loan program is returned in accordance with the terms of the loan and any Title IV grant program as an overpayment of the grant. However, a student is not required to return the portion of a grant overpayment amount that is equal to or less than 50 percent of the total grant assistance that was disbursed for a payment period or a grant overpayment amount of 50 dollars or less that is not a remaining balance.

Repayment of the overpayment by the student and Title IV eligibility

A student who owes an overpayment remains eligible for Title IV and HEA program funds through the earliest of 45 days from the institutional notification of the overpayment or 45 days from the date the institution was required to notify the student of the overpayment if, during the 45 days, the student repays the overpayment in full to the institution or enters into a repayment agreement that is satisfactory with the institution with a maximum payment in full within two years.

Student notification for repayment

The institution must notify a student within 30 days of the institution’s determination that the student withdrew and owes a Title IV or HEA overpayment in order to recover the overpayment. The notification provides the student with terms to permit the student to repay the overpayment while maintaining Title IV and HEA program funds with repayment of the full amount of the overpayment within two years of the date of the institution’s determination the student withdrew.

Loss of Title IV eligibility

In the context of Return of Title IV funds, a student is no longer eligible if they do not enter into a repayment agreement within the 45-day period or fails to meet the terms of the repayment agreement.

Order of return of Title IV funds

Unearned funds returned by the institution or student are credited to outstanding Title IV loan balances made to the student or on behalf of the student for the payment period. Excess funds must be credited to outstanding balances in the following order:

• Federal Direct Unsubsidized loans
• Federal Direct Subsidized loans
• Federal Direct PLUS loan received on the behalf of the student

If unearned funds remain to be returned after repayment of all outstanding loan amounts, the remaining excess must be credited to any amount awarded in the payment period to grant programs in the following order:

• Federal Pell Grants
• Iraq and Afghanistan Service Grants (IASG)
• Federal SEOG

An institution must return the funds for which it is responsible as soon as possible but no later than 45 days after the date of its determination that the student withdrew. An institution must determine the withdrawal date for a student that does not provide notification to the institution no later than 30 days after the end of the earlier of the payment period or period of enrollment.

IU Indianapolis refunds credit balances as soon as possible, but no later than 14 days after the R2T4 calculation is completed.

The following rules apply when completing a Return calculation for a student.

1. IU Indianapolis will return any unearned Title IV funds it is responsible for returning within 45 calendar days of the date UNT determined the student withdrew, and offer any post-withdrawal disbursement of loan funds within 30 calendar days of that date.
2. Unless a student subject to verification has provided all required verification documents in time for IU Indianapolis to meet the Return deadlines, IU Indianapolis includes as Aid Disbursed or Aid That Could Have Been Disbursed in the Return calculation.
3. If it is determined that a student who failed to provide all required verification documents in time for IU Indianapolis to meet the Return deadline and later provides those documents prior to the applicable verification deadline, IU Indianapolis must perform a new Return calculation on all of the aid the student qualified for based on the completed verification documents and make the appropriate adjustments.
4. To give a Pell Grant to a student, IU Indianapolis must have a valid output document (one with an official Expected Family Contribution computed from correct data) while the student is still enrolled for the award year or in the time frame the student qualifies for a late disbursement under 34 CFR 668.164(j)(4)(i).

In the event of a deceased student, all credit balances are removed by returning aid to the proper Title IV programs.

Time Frame for the Return of an Unclaimed Title IV Credit Balance

In the event IU Indianapolis cannot locate the student (or parent) to whom a Title IV credit balance must be paid, Student Accounting (SFS) will determine what programs constitute the refund and will notify IU Indianapolis of any unclaimed credit balances that need to be returned to Title IV, HEA programs. IU Indianapolis must return the funds no later than 240 calendar days after the date the school issued the check or 45 calendar days after the EFT was rejected.