Federal Title IV Refund Requirements
As a result of the Higher Education Amendments of 1998, federal financial aid recipients who completely withdraw from all their classes (prior to attending classes more than the 60% point in time of the semester) will be subjected to federal requirements for the return of Title IV federal grants (Pell, SEOG, ACG, etc.) and Title IV loans (Subsidized Stafford, Unsubsidized Stafford, Parent PLUS Loans).
The law now defines the amount of Federal Title IV grants and loans that the student has earned the right to use to pay for tuition or to retain as a refund. Federal funds must be returned to the Federal Programs if a student withdraws from all classes or ceases attending all classes prior to completing more than 60% of the semester. The reasoning behind the new refund policy is as follows:
Title IV funds are awarded to qualified students for the sole purpose of enabling the recipient to obtain an education. Thus, there is an implied contract with the student that he or she will honor that contract by satisfactorily completing the course of study for that payment period. If the student withdraws during the payment period, thereby not fulfilling his or her part of the implied contract, then it is appropriate to require a reasonable portion of the Title IV funds to be returned in order to insure proper stewardship of federal taxpayers’ dollars. The student aid programs are not income-maintenance programs, and should not be viewed as such.
The Title IV refund formula, therefore, is based upon the concept that a student must earn the amount of federal grants or loans that the student has received. A student who withdraws has not earned the entire amount of grants and/or loans the student has received and, therefore, must return the unearned portion to the appropriate program. To determine the amount of unearned assistance the student must return to the Federal Programs, the following steps are followed:
- Calculate the Title IV assistance earned. To calculate the amount of Title IV assistance earned by a student, Daytone State must first determine the percentage of Title IV assistance the student earned. Up through the 60% point in time, the percentage of assistance earned is equal to the percentage of the payment period or period of enrollment for which it was awarded that was completed as of the day the student withdrew. If the student withdrawal occurs after the 60% point, then the percentage is 100%.* That earned percentage is applied to the total amount of Title IV grant and loan assistance that was disbursed to the student, or on the student’s behalf, for the payment period or period of enrollment for which it was awarded as of the day the student withdrew.
- Calculate the Title IV assistance not earned. The amount of Title IV grant and loan assistance not earned by the student is calculated by determining the complement of the percentage of assistance the student earned and applying it to the total amount of grant and loan assistance that was disbursed (and that could have been disbursed) to the student, or on student’s behalf, for the payment period or period of enrollment as of the day the student withdrew.
- Calculate the amount of the student’s Title IV funds which had been applied to the student’s account and must be returned. The College shall return to the appropriate Title IV program(s) the lesser of the unearned amount of Title IV assistance or an amount equal to the total institutional charges the student incurs for the payment period or period of enrollment for which the assistance was awarded, multiplied by the unearned percentage of awarded Title IV grant and loan assistance. The College will return the unearned percentage of awarded Title IV grant and loan assistance to the federal program according to the order listed below.
- Calculate the amount of refund Title IV funds which had been r eceived by the student and must be returned. The student must return the unearned Title IV assistance to the appropriate federal program.
Special rule. A student (or parent for Parent PLUS loans) repays the calculated amount attributable to a Title IV loan program according to the loan’s terms. A student repays a Title IV grant program subject to repayment arrangements satisfactory to the school or the Secretary’s overpayment collection procedures. A student shall not be required to return 50% of the grant assistance received that is the responsibility of the student to repay.
Order of return of Title IV funds. Excess funds returned by the school or student are credited to outstanding Title IV loan balances for the student or made on the student’s behalf for which a return of funds is required. Excess funds must be credited to outstanding balances in the following order:
- Unsubsidized Stafford Loan
- Subsidized Stafford Loan
- PLUS Loan
- Remaining excesses. If excess funds remain after repaying all outstanding loan amounts, then the remaining amount is credited to grant programs in the following order:
- Federal Pell Grant
- Federal Academic Competitiveness Grant
- Federal Supplemental Educational Opportunity Grant
Examples of the application of the Title IV Refund Policy are available from the Financial Aid Services Office upon request.
Please note: Summer A and Summer B are considered two separate semesters for the Title IV calculation purposes.
