Trending AskRegs Q&A: Can We Return to ED a Title IV Credit Balance Caused by Not Returning Unearned Funds From the R2T4 Calculation?

Can We Return To ED a Title IV Credit Balance Caused By Not Returning Unearned Funds From the R2T4 Calculation?

It depends on whether you have the student's or parent's uncoerced written permission to do so within 14 days of when the Title IV balance was created.

The following guidance is from the May 15, 2020 Electronic Announcement:

"The Department’s R2T4 provisions do not affect institutional refund policies. However, some institutions or states may have policies requiring the refund of some or all of a student’s tuition charges if the student withdraws during a certain period of time. If a student who qualifies for CARES Act R2T4 relief withdraws and is granted a tuition refund, the refund may create a Title IV credit balance that must be provided to the student within 14 days.

For example, consider a student who withdraws during the first week of a semester as a result of COVID-19 disruptions. The student was originally charged $10,000 in tuition and received $5,000 in Pell Grant funds and $3,500 in a Subsidized Direct Loan. When the student withdraws, the tuition refund policy will result in a refund of $9,000 in tuition, leaving only $1,000 in charges on the student’s account. Furthermore, because R2T4 requirements will be waived, the student will still have a total of $8,500 in Title IV funds on his or her account, resulting in a Title IV credit balance of $7,500 that must be paid to the student within 14 days of the refund."

The school cannot choose to return the Title IV credit balance on the student's or parent's behalf unless it has an uncoerced written authorization from the student or parent to do so. Also, the school cannot dictate how the student or parent spends the Title IV credit balance refund. Otherwise, if the student or parent wants to use those funds to make a payment on his or her loan, the student or parent can use the credit balance to make a loan payment. Once the R2T4 reporting process is developed and ED receives that reporting, ED will cancel the entire amount of any disbursement of a Direct Loan borrowed by the student or his or her parent for the payment period or period of enrollment during which the COVID-19 related withdrawal took place.

Remember, under 34 CFR 668.164(h) a Title IV credit balance only occurs whenever the amount of Title IV funds credited to a student's ledger account for a payment period exceeds the amount assessed the student for allowable charges associated with that payment period. It does not matter how or when non-Title IV funds are credited to the student's ledger account.

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Publication Date: 5/22/2020

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