House Bill Would Significantly Change Return of Title IV Funds (R2T4) Process

By Policy & Federal Relations Staff

A bill introduced earlier this month by Rep. Jason Lewis (R-MN) would significantly change the return of Title IV funds (R2T4) process when a student withdraws from school during a payment period. The proposed legislation — called the College Completion and Success Act and co-sponsored by Reps. Drew Ferguson (R-GA), Thomas Garrett (R-VA), Lloyd Smucker (R-PA), and Francis Rooney (R-FL)- would simplify certain aspects of the calculation, narrow the definition of "schools that are required to take attendance," and restore some discretion to schools in paying post-withdrawal disbursements. It would change the order of distribution of returned funds, increase the amount that must be returned in most cases, and shift responsibility for repaying unearned funds to the institution. The bill would also require a more defined distinction between changing enrollment status as opposed to withdrawing in the case of modules.

Under the bill, the percentage of aid earned would be based on a quarterly assessment of the payment period rather than a day-by-day reckoning. Depending on the range of percentages within which the student's withdrawal date occurs, the amount earned would be zero, 25, 50 or 75 percent of aid, as follows:

Percentage of payment period within which withdrawal date occurs

Percentage of aid earned

0 to 24

0

25 to 49

25

50 to 74

50

75 to 99

75

 

Thus, under the proposed legislation, a student could earn 100 percent of aid only by completing the payment period, and all aid is forfeited if the student does not attend through the 24 percent point. While using a percentage spread may simplify the current process and reduce error — determining the exact number of days attended, and thus the percentage of aid earned, is consistently one of the top compliance findings in audits and program reviews – the tradeoff is that there are greater penalties attached to withdrawal in terms of returning aid.

The institution would be responsible for returning all unearned aid, although the bill allows the institution to require that student reimburse it for up to 10 percent of the amount it had to return. The bill clarifies that the institution may continue to enforce its own refund policies. This change would presumably eliminate student ineligibility due to overpayments resulting from withdrawal, as the student's obligation for any repayment would be only to the institution, and not the federal government.

Unearned funds would first be applied toward a student's Pell Grant and FSEOG. Any remaining unearned funds would be returned to Title IV loans.

If the student would qualify for a post-withdrawal disbursement (i.e., the student earned more aid than had been disbursed as of the withdrawal date), the institution may determine whether and what portion of the disbursement should be offered for payment.

The bill would retain the current distinction between institutions that are and are not required to take attendance, but specifies that an institution would be considered required to take attendance if its accrediting agency or state licensing agency has a requirement that the institution take attendance for all students in an academic program throughout the entire payment period. This definition should narrow and simplify the current process. The withdrawal date for a student who dropped out without beginning the official withdrawal process from a program in which attendance taking is not required would continue to be defined as the 50 percent point, or another date documented by the institution. The bill continues to require that institutions publicize their withdrawal process, but eliminates the institution's obligation to use a date on which the student otherwise declares an intent to withdraw. An institution would continue to have discretion to set a withdrawal date under extenuating circumstances.

If a student is attending a program offered in modules, the bill specifies that the student is not to be considered withdrawn if the change in the student's attendance constitutes a change in enrollment status rather than a discontinuance of attendance. The student would only be considered withdrawn if he or she follows the institution's official withdrawal procedures or leaves without notifying the institution and has not returned before the end of the payment period.

 

Publication Date: 11/28/2017


Kenneth C | 11/29/2017 10:14:45 AM

This would be a devastating change in the R2TIV process for many low income students. Low income students are more likely to withdraw due to financial, family and medical issues and are more likely to borrow loans and have more need based aid. As such they are disproportionately affected by R2TIV policies that penalize them severely for having unforeseen events, like deaths in the family, losing housing, having to work more and having medical issues. There is no appeal process for R2TIV so all of these traumatic events can completely ruin a low-income student's chance of ever getting a degree and ruin their future financial stability.

R2TIVs cause students to owe thousands of dollars that must be repaid before the students can qualify for aid again. If it is owed to an institution that college will often withhold the transcripts, thus preventing the student from being able to enroll at any other college. Yet these students are already low-income and are thus more likely to have already spent their entire refund on necessary expenses and are less likely to be able to repay these debts. Wealthy students rarely owe much on an R2TIV and if they do can often repay it immediately.

Making R2TIV more restrictive and forcing students to pay back more aid will only cripple the poor. Any changes must include an appeals process for those students who had to withdraw for reasons beyond their control.

Finally, the R2TIV policy currently forces students to choose between failing college owing a bill. The whole point of college withdrawal is to allow students to avoid failing grades. But R2TIV forces low-income students to decide if they get all "F"s and not owe a bill, or Withdraw to keep their GPA up, but owe a huge bill they may not be able to repay.

SAP and UEP already deal with withdrawals. Let R2TIV only apply for early withdrawals, or give it an appeals process.

-Ken Cole

Timothy S | 11/28/2017 4:16:15 PM

Kenneth, I wouldn't blame one party over the other. This follows a similar trend on Pell LEU, SULA, removal of Perkins, and subsidies most likely going away in the near future.

Peter G | 11/28/2017 12:21:43 PM

"The institution would be responsible for returning all unearned aid, although the bill allows the institution to require that student reimburse it for up to 10 percent of the amount it had to return. "

If I'm reading this correctly this would shift the financial impact from student withdrawals even more heavily onto institutions than exists currently.

Similar to Vicki's point, this approach could be very harmful to CCs/open access institutions in particular. In conjunction with the 'full return' requirement for 0-24%, and the expansion of returns beyond 60%, you would far more frequently end up with institutional write-offs, including many students representing a sizable net loss.

Vicki K | 11/28/2017 9:27:09 AM

I'm not certain here if the supporters of this type of legislation are attempting to hurt just at-risk students attempting to better themselves, or if they want to change the mission of community colleges whose mission is to open our doors to these students. As an aid director at a community college in the mid-west, I've always been proud to help serve students who come to us with baggage...watching them work hard, struggle, and succeed is the best part of what we do. But we also get to watch them fail and come back to try again and often succeed in spite of their horrendous life circumstances. Legislation like this not only makes it more difficult for them to re-set and try again, but it forces colleges to re-think their admission requirements, putting forth more obstacles for these students. Wasn't the original intent of the federal programs to provide access for all?

Kenneth F | 11/28/2017 9:7:01 AM

Another attempt by the conservative Republicans to make it more difficult for students who may not be able to complete a semester. I realize students must be held accountable in the use of Federal dollars but this will significantly increase the number of students who fail to return to college due to owing Return of Title IV funds.

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