Return of Title IV Funds, Modules, and Administrative Withdrawals

NASFAA recently received guidance from the Department of Education (ED) regarding the return of Title IV funds and programs offered in modules. This is the scenario NASFAA presented to ED:

A term consists of two modules. A student is enrolled in one course in each module. Due to low enrollment, the school cancels the class for which the student is registered in the second module and he is unable to register for another class. The class was canceled after the end of the first module. Is the school required to perform a return calculation?

ED’s guidance is that this is an administrative withdrawal; the school must perform a return of Title IV funds (R2T4) calculation. If the school is not required to take attendance, the date of the administrative action would be both the student’s withdrawal date and the date of determination. For schools required to take attendance, the student’s last date of attendance in the first module would be the withdrawal date and the date of determination would be the date the institution administratively withdrew the student from the second module.

When calculating the percentage of the payment period completed, the total number of days in the payment period (the denominator) would depend on when the school took the administrative action. In this example, since the school did not cancel the class in the second module until after the end of the first module, the denominator would include all the calendar days in both modules, minus any scheduled breaks of five consecutive days or longer. Since the scenario is for a term-based program, the school would also be required to recalculate the student’s eligibility for a Federal Pell Grant, if applicable, since the student would not begin attendance in the second module as scheduled. The school must recalculate a Federal Pell Grant award before performing the R2T4 calculation. The institution would also have to recalculate the student’s cost of attendance to determine if the student’s eligibility for campus-based aid (if awarded) has changed. 

On the other hand, if the institution canceled the class before the end of the first module while the student was still enrolled, then the administrative action caused a change in the student’s enrollment status and he has not withdrawn. Although the school is not required to perform a return of Title IV funds calculation, it must recalculate a Federal Pell Grant award, if applicable, since the student will not begin attendance in all classes for which he was originally awarded. If the student received a Federal Direct Student Loan (Direct Loan) disbursement for the term, the school is not required to return the funds since the student was eligible at the time of disbursement. However, the school must notify the Direct Loan Servicing Center that the student is now less than half time. The student’s change in enrollment status would start the six-month grace period for a Direct Subsidized Loan and/or Direct Unsubsidized Loan and could affect the deferment status of a parent PLUS.



Publication Date: 4/2/2012

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