Pop Quiz – How Do We Handle Disbursed Aid When Verification Selection Happens Between the Withdrawal and the Return Calculation?

Question:

The school has a student who was awarded, aid disbursed, and the student withdrew. The student was then selected for verification before the return to Title IV funds calculation was begun. The school then returned the student’s funds due to his selection for verification. Should we have returned the funds?

Answer:

No. Schools should not make it a practice to return Title IV aid immediately after a student is selected for verification if selected after funds were already disbursed. Do not disburse any future aid and allow students the opportunity to meet your verification and/or R2T4 deadlines. Depending on timing and the type of aid, the school may be prohibited from re-disbursing the aid.

Verification is not required if the student is selected for verification after the student is no longer enrolled. So, in your scenario, you are not required to verify the student and the student was eligible for the Title IV aid they received.  The school should re-disburse all the Title IV aid except for the Direct loan, because that would require a new origination.  Late disbursement rules 668.164(j)(4)(i) do not allow loan funds to be disbursed if the loan was not originated prior to the student’s LDA. Your R2T4 calculation should include all the aid disbursed at the time the student withdrew, including any Direct loan funds that cannot be re-disbursed.  NASFAA recommends that the school cover the portion of the student balance owed to the school that would have been covered by the loan funds returned by the school after the student was selected for verification.  See AskRegs Knowledgebase Q&A: Do We Have to Verify a Student Who Is No Longer Enrolled For the Award Year?

Publication Date: 11/20/2018