Pop Quiz – How is a Return of Title IV Funds Handled for a Student Who Died During the Term?

Question:

At the end of the term, a school is notified that a student stopped attending. The school finds out that the last date of attendance was earlier in the term. The student has since passed away. How should the return of Title IV funds be handled?

Answer:

It is stated on page 5-87 of the 2016-17 FSA Handbook: "A school may not make a Post-withdrawal disbursement of Title IV funds to the account or estate of a student who has died."

Furthermore, on page 5-86 it states:

"If a school determines that a student has died during a period, it must perform a Return calculation. If the Return calculation indicates that an institution is required to return Title IV funds, the school must return the Title IV funds for which it is responsible.

The student’s estate is not required to return any Title IV funds disbursed to the student. Therefore, an institution should neither report a grant overpayment for a deceased student to NSLDS, nor refer a grant overpayment for a deceased student to Debt Resolution Services. If an institution had previously reported a grant overpayment for a student who is deceased to Debt Resolution Services, it should inform Debt Resolution Services that it has received notification that the student is deceased.

The regulations governing the Direct and Federal Perkins Loan programs provide for a discharge of a borrower’s obligation to repay a Federal Direct or Federal Perkins Loan if the borrower dies (including a Direct PLUS Loan borrower’s obligation to repay a Direct PLUS Loan if the student on whose behalf the parent borrowed dies). If a school is aware that a student who has died has any outstanding Title IV loan debt, the school should contact the student’s estate and inform it of the actions it can take to have the student’s Title IV loan debt cancelled.

If a Title IV credit balance created from funds disbursed before the death of the student exists after the completion of the Return calculation and the institutional refund calculations, the institution must resolve the Title IV credit balance in one of the following three ways:

  1. In accordance with the cash management regulations, pay authorized charges at the institution (including previously paid charges that are now unpaid due to the Return of Title IV funds by the institution).
  2. Return any Title IV grant overpayments owed by the student for previous withdrawals from the present school (the institution may deposit the funds in its federal funds account and make the appropriate entry in G5).

If the institution has previously referred the grant overpayment to Debt Resolution Services, the institution should provide Debt Resolution Services with documentation that the student has died so that Debt Resolution Services can delete the overpayment from its records.

  1. Return any remaining credit balance to the Title IV programs.”

 

Publication Date: 11/9/2016


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