Return of Title IV Funds
In accordance with Federal Regulation, an institution must return title IV funds as specified below. The return order of funds is specified by regulation and is not subject to change by the school or a student.
(1) Loans. Unearned funds returned by the institution or the student, as appropriate, in accordance with federal regulations, must be credited to outstanding balances on title IV loans made to the student or on behalf of the student for the payment period or period of enrollment for which a return of funds is required. Those funds must be credited to outstanding balances for the payment period or period of enrollment for which a return of funds is required in the following order:
Unsubsidized Federal Direct Stafford loans
Subsidized Federal Direct Stafford loans
Federal Perkins loans
Federal Direct PLUS loans received on behalf of the student
(2) Remaining Funds. If unearned funds remain to be returned after repayment of all outstanding loan amounts, the remaining excess must be credited to any amount awarded for the payment period or period of enrollment for which return of funds is required in the following order:
Federal PELL Grants
FSEOG Program aid
Treatment of Title IV Aid When a Student Withdraws
REQUIREMENTS OF 34 CFR 668.22
Treatment of Title IV Aid When a Student Withdraws
The law specifies how your school must determine the amount of Title IV program assistance that you earn if you withdraw from school. The Title IV programs that are covered by this law are: Federal Pell Grants, Iraq and Afghanistan Service Grants, Academic Competitiveness Grants, National SMART grants, TEACH Grants, Stafford Loans, PLUS Loans, Federal Supplemental Educational Opportunity Grants (FSEOGs) and Federal Perkins Loans.
When you withdraw during your payment period or period of enrollment (your school can define these for you and tell you which one applies), the amount of the Title IV program assistance that you have earned up to that point is determined by a specific formula. If you received (or your school or parents received on your behalf) less assistance than the amount that you earned, you may be able to receive those additional funds. If you received more assistance than you earned, the excess funds must be returned by the school and/or you.
The amount of assistance that you have earned is determined on a prorate basis. For example, if you completed 30%of your payment period or period of enrollment, you earn 30% of the assistance you were originally scheduled to receive. Once you have completed more than 60% of the payment period or period of enrollment, you earn all the assistance that you were scheduled to receive for that period.
If you did not receive all of the funds that you earned, you may be due a Post-withdrawal disbursement. If your Post-withdrawal disbursement includes, loans funds, your school must get permission before it can disburse them. You may choose to decline some or all of the loan funds so that you don’t incur additional debt. Your school may automatically use all or a portion of your Post-withdrawal disbursement of grant funds for tuition, fees and room and board charges (as contracted with the school). The school needs your permission to use the Post-withdrawal grant disbursement for all other school charges. If you do not give your permission (some schools ask for this when you enroll), you will be offered the funds. However, it may be in your best interest to allow the school to keep the funds to reduce your debt at the school.
There are some Title IV funds that you were scheduled to receive that cannot be disbursed to you once you withdraw because of other eligibility requirements. For example, if you are a first-time, first-year undergraduate student and you have not completed the first 30 days of your program before you withdraw, you will not receive any Direct Loan funds that you would have received had you remained enrolled passed the 30th day.
If you receive (or your school or parent received on your behalf) excess Title IV program funds that must be returned, your school must return a portion of the excess equal to the lesser of:
- Your institutional charges multiplied by the unearned percentage of your funds, or
- The entire amount of excess funds.
The school must return this amount even if it didn’t keep this amount of your Title IV program funds.
If your school is not required to return all of the excess funds, you must return the remaining amount. Any loan funds that you must return, you (or your parent for a PLUS Loan) repay in accordance with the terms of the promissory note. That is, you make scheduled payments to the holder of the loan over a period of time.
Any amount of unearned grant funds that you must return is called an overpayment. The maximum amount of a grant overpayment that you must repay is half of the grant funds you received or were scheduled to receive. You do not have to repay a grant overpayment if the original amount of the overpayment is $50 or less. You must make arrangements with your school or Department of Education to return the unearned grant funds.
The requirements for the Title IV program funds when you withdraw are separate from any refund policy that your school may have. Therefore, you may still owe funds to the school to cover unpaid institutional charges. Your school may also charge you for any Title IV program funds that the school was required to return. If you don’t already know what your school’s refund policy is, you can ask your school for a copy. Your school can also provide you with the requirements and procedures for officially withdrawing from school.
If you have any questions about your Title IV funds, you can call the Federal Student Aid Information Center at 1-800-4-FEDAID (1-800-4333243). TTY users may call 1-800-730-8913. Information is also available on Student Aid on the Web at www.studentaid.ed.gov.