1. Return of Title IV Funds (With Changes from HERA) Higher Education Reconciliation Act of 2005 (P. L. 109-171) Brian Kerrigan Dan Klock Session 11

2. 2 Today’s Agenda DCL issues Regulation changes from HERA R2T4 calculation with HERA changes Compliance self-monitoring Questions & answers

3. 3 Presentation Objectives Bring you up to date on R2T4 changes Demonstrate changes in calculation Understand that R2T4 non-compliance is a top finding Answer questions

4. 4 Dear Colleague Letter (GEN-04-03)

5. 5 Title IV credit balance Aid that could have been disbursed Verification not completed before withdrawal No passing grades Withdrawal – credit hr, non-term program Date of determination of withdrawal for institution required to take attendance

6. 6 Title IV Credit Balances Hold credit balance - do R2T4 first Credit balance is “Aid Disbursed” See if credit balance changes because of R2T4 Repay grant overpayment on behalf of student Release credit balance within 14 days

7. 7 Aid That Could Have Been Disbursed All aid for period, if late disbursement conditions met before student withdraws (668.164(g)(2)) However, if limitations apply, aid may not be paid to student (668.164(g)(4))

8. 8 Conditions for a Late Disbursement (need to be before student withdraws) For all aid (except PLUS) – process date for official EFC on SAR / ISIR For FFEL / Direct Loan – loan certified or originated For Perkins / FSEOG – award made

9. 9 Limitations on Making Late Disbursement No second or subsequent disbursement of FFEL / DL, unless student completes period No FFEL / DL unless student completes 30-day delay period

10. 10 Limitations on Making Late Disbursement No Pell Grant without valid SAR / ISIR by deadlines in Federal Register No 2nd pp Pell if 1st pp not completed No 2nd pp FFEL / DL if 1st pp not completed

11. 11 Verification Must complete R2T4 within 45 days If verification not completed –Return interim disbursements of aid –Only unsubsidized and PLUS loans in R2T4 If verification completed later – new R2T4 calculation using additional eligible aid

12. 12 No Passing Grades Institution must have process for determining if student completed period Institution must document completion of period

13. 13 Withdrawal from Credit Hour Non-term Program Percentage earned is equal to calendar days completed divided by calendar days in period Project calendar days in period if student is in a self-paced program

14. 14 Date of Determination that Student Withdrew For School Required to Take Attendance No later than two weeks after last date of attendance Based on attendance records Date of official notification if prior to that After end of institution’s absence policy

15. 15 HERA Regulation Changes

16. 16 Programs Specified for R2T4 Perkins Direct Loan FFEL Pell Grant Academic Competitiveness Grant National SMART Grant FSEOG

17. 17 Post-withdrawal Disbursement - HERA Credit grant for tuition and fees & room and board (without authorization) and for other charges (with authorization)

18. 18 Post-withdrawal Disbursement - HERA Credit loan for tuition and fees & room and board (without authorization) and for other charges (with authorization) –Written notification to the student / parent and their confirmation must be received before the loan funds may be credited to the account or directly disbursed

19. 19 Written Notification (within 30 days of date of determination of withdrawal) Identifies loan to be credited & grant and loan available as direct disbursement Asks if student / parent wants –loan credited & –grant or loan as direct disbursement

20. 20 Written Notification (explains) Student / parent can accept some / all of aid If student / parent declines credit of loan, she may not receive direct disbursement unless institution agrees Obligation to repay loan 14 day (or later) response time

21. 21 Written Notification Deadline to accept PWD either directly or as credit to account must be same PWD must be disbursed in manner specified by student / parent within 120 days of date of determination of withdrawal

22. 22 Written Notification If response from student / parent is late, institution may make or not make PWD If institution declines to make PWD, it must inform student / parent If there is no response to notification, no loan may be credited to account & no grant or loan may be disbursed directly

23. 23 Clock Hour Changes Scheduled clock hours always used Scheduled clock hours as of withdrawal divided by clock hours in period If greater than 60%, student earns 100%

24. 24 Clock Hour Changes Scheduled clock hours must be: –established prior to beginning of classes (or modified before withdrawal date) –consistent with: published materials accrediting agency / state

25. 25 Grant Overpayment Protection (to amounts student is required to return) 50% of amounts disbursed (and that could have been disbursed) $50.00 or less per program (but, not remaining balances of $50.00 or less) Waiver of overpayments for students residing in, employed in, or attending institutions in declared disaster areas

26. 26 Return of Funds Order Loan Programs Pell Grant Program Academic Competitiveness Grant Program National SMART Grant Program FSEOG Program

27. 27 R2T4 Worksheets/Software

28. 28 Step 1:

29. 29 Step 1: Student’s Title IV Aid All information collected about Title IV aid either “disbursed” or “could have been disbursed” Broken down by Grants and Loans This is straight-forward, although the data is collected as noted on the next slide

30. 30 Step 1: Student’s Title IV Aid Box E. Total Title IV aid disbursed for the PP or POE –Used to determine the amount of PWD or returned

31. 31 Step 1: Student’s Title IV Aid Box F. Total Title IV grant aid disbursed + could have been disbursed for the PP or POE –Used to determine the TIV grants amount that is protected under HERA

32. 32 Step 1: Student’s Title IV Aid Box G. Total of all aid disbursed or could have been disbursed –Used to determine the amount of TIV aid earned

33. 33 Step 2: Credit hour

34. 34 Step 2: Clock hour

35. 35 Step 2: Percentage of TIV Aid Earned Credit-hour program - same as pre-HERA –If % is > 60% = 100% TIV earned

36. 36 Step 2: Percentage of TIV Aid Earned Clock-hour program –This becomes a one-step calculation Hours scheduled to complete Total hours in period (PP or POE) – If % is > 60% = 100 % TIV earned

37. 37 Step 3:

38. 38 Step 3: Amount of TIV aid Earned by the Student Remains % earned (Box H) X Total of TIV aid disbursed or could have been disbursed (Box G)

39. 39 Step 4:

40. 40 Step 4: Total Title IV Aid to be Disbursed or Returned PWD or Amount to be Returned –Remains same as before: Amt earned > Amt disb’d = PWD Amt earned < Amt disb’d = Amt to be Returned

41. 41 Step 5:

42. 42 Step 5: Amount of Unearned Title IV Aid Due from the School Unearned amount of Title IV aid due from the school is calculated the same as before –Lesser of Total amount of unearned aid, or Institutional charges X % of unearned aid

43. 43 Step 6:

44. 44 Step 6: Return of Funds by the School Return order of TIV aid has changed –Loans Unsubsidized FFEL/DL Subsidized FFEL/DL Perkins FFEL/DL PLUS (Graduate student) FFEL/DL PLUS (Parent)

45. 45 Step 6: Return of Funds by the School –Grants Pell Grant Academic Competitiveness Grant National SMART Grant FSEOG

46. 46 Step 7:

47. 47 Step 7: Initial Amount of Unearned TIV Aid Due from the Student Total amount unearned TIV aid - Amount school has to repay Amount student has responsibility to repay

48. 48 Step 8:

49. 49 Step 8: Repayment of the Student’s Loans Student repays what he has earned plus what he has not earned that the school does not repay Total TIV net loans disbursed - Amount of TIV loans school repaid Remaining balance of TIV loans

50. 50 Step 8: Repayment of the Student’s Loans If the amount of unearned less the amount the school repaid (Step 7) is greater than the remaining balance of TIV loans outstanding – go to Step 9

51. 51 Step 9:

52. 52 Step 9: Grant Funds to be Returned Initial amount of unearned aid that the student has responsibility for (Step 7) - Amount to be repaid by student on loans Initial amount of TIV grants for student to repay

53. 53 Step 9: Grant Funds to be Returned NEW: Amount of TIV grant protection: Total of TIV grants disbursed or could have been disbursed X 50% = the protected amount

54. 54 Step 9: Grant Funds to be Returned Initial amount of TIV grants for student to repay - the protected amount of TIV grants Amount of TIV grants to be returned by the student

55. 55 Step 10:

56. 56 Step 10: Return of Grant Funds by the Student Pell Grant Academic Competitiveness Grant National Smart Grant FSEOG Note that the student is not responsible for returning funds to any program to which the student owes $50.00 or less

57. 57 Student A Pell Grant - $2025 Student attended 10%

58. 58 Student A Earned and unearned: 10% X $2,025 = $202.50 amount earned Amount to be returned: $2,025 - $202.50 = $1,822.50 Amount school returns: $1,000 (Inst charges) X 90% (Unearned %) = $900 * [The lesser of $1,822.50 or $900]

59. 59 Student A Initial amount student owes: $1,822.50 less $900 = $922.50 Amount of TIV grant protection: $2,025 X 50% = $1,012.50 Amount of TIV grant funds for student to repay $922.50 less $1,012.50 = $0 (Negative # set to zero)

60. 60 Student B Pell Grant - $500, SMART - $2,000, FSEOG - $1,000 Student attended 10%

61. 61 Student B Earned and unearned: 10% X $3,500 = $350 amount earned Amount to be returned: $3,500 - $350 = $3,150 Amount school returns: $1,000 X 90% = $900 * [The lesser of $3,150 or $900, so $500 Pell and $400 SMART repaid by inst.)]

62. 62 Student B Initial amount student owes: $ 3,150 less $900 = $2,250 Amount of TIV grant protection: $3,500 X 50% = $1,750 Amount of TIV grant funds for student to repay $2,250 less $1,750 = $500 [Since Pell fully repaid, goes to SMART]

63. 63 De minimis Amount Q: Is the $50.00 de minimis amount applicable to the total amount of grant funds owed or is it program by program? A: The $50.00 de minimis amount is applicable on a program by program basis. Therefore, if after the amount that the school must return, the student owes $50 or less to each program - Pell, ACG, National SMART, and FSEOG, the student would not owe a Title IV grant overpayment to any of these funds

64. 64 De minimis Amount Q: Is the $50.00 de minimis amount also applicable to overpayments of FSEOG and Federal Perkins loans? A: No. Under the provisions of 34 CFR 673.5(f), an overpayment made by the institution to a student (that is not a remaining balance) of less than $25 is not referred to the Secretary for repayment – it is considered a de minimis amount. When the HERA increased the amount of a de minimis amount of a Return of Title IV Funds grant overpayment to $50 or less, it did not alter Part 673 on overawards of Perkins and FSEOG.

65. 65 Post-withdrawal Disbursements Q: Are the new notification requirements limited to when a portion of the PWD is from a TIV loan program? A: No. If the PWD includes any TIV grant funds that will be directly disbursed to the student, they too must meet the notification requirements.

66. 66 Post-withdrawal Disbursements Q: What are the notification requirements? A: 1. The notification must be written 2. Must request confirmation to credit loan funds to the student’s account (also need 34 CFR 668.164 authorization for certain charges for both grants and loans) 3. Must identify the types and amounts of the loan that will be credited to the account; and the types and amounts of loans and grants that will be directly disbursed to the student/borrower

67. 67 Post-withdrawal Disbursements 4. Must explain that the student/borrower can decline or reduce any amount of those funds 5. Must establish a deadline for the student/borrower to provide confirmation to the school 6. Explains that if the confirmation of crediting loan funds to the student’s account is not provided, rather that all the loan funds should be directly disbursed to the student/borrower, that the student/borrower may not receive any loan funds as a direct disbursement, unless the school concurs

68. 68 Post-withdrawal Disbursements 7. Must explain the obligation to repay 8. The deadline established by the school must be the same for both the confirmation of a direct disbursement and a confirmation to credit loan funds to the student’s account 9. If confirmed, the PWD must be made within 120 days of the date of determination by the school that the student withdrew

69. 69 Post-withdrawal Disbursements 10. If the student/borrower provides confirmation after the deadline, the school may elect not to provide the PWD, but if the school chooses not to provide the PWD, it must contact the student/borrower 11. If the student/borrower does not respond, no portion of the loan may be credited to the student’s account, nor may any amount to be directly disbursed be released

70. 70 Clock Hour Programs Scheduled Hours Q: Under HERA, the scheduled hours must be those established prior to the student’s beginning class date. Can you provide an example of how the school can establish the scheduled hours? A: Yes. When the student enrolls, generally, the number of clock hours would be established as a part of the student’s enrollment agreement.

71. 71 Clock Hour Programs Scheduled Hours Q: Can the established scheduled hours ever be changed once the student has begun classes? A: Yes. Except the change cannot be related to or as a result of the student’s withdrawal.

72. 72 50% Grant Protection Q: The statute states that the grant overpayment amount is the amount that exceeds 50% of the total Title IV grants “received” by the student. Does that include grant amount that could have been received by the student or does it mean only the disbursed amounts? A: Yes. Amounts “received” generally means the amount of Title IV grants disbursed and those that could have been disbursed for the period for which the calculation is performed.

73. 73 Disaster Waiver Q: Under what conditions is the student’s portion of a Title IV grant overpayment forgiven due to a disaster? A: Under Public Laws 109-66 and 109-67 a student's Title IV grant overpayment otherwise due under the Return of Title IV Aid requirements is waived if the student withdrew because of a disaster under the following conditions:

74. 74 Disaster Waiver The student was residing in, employed in, or attending an institution that is located in an area in which the President has declared that a major disaster exists; The student withdrew because of the impact of the disaster on the student or the institution; and The student's withdrawal occurred within the award year during which the designation as a major disaster occurred or during the next succeeding award year.

75. 75 Disaster Waiver For purposes of this waiver, a "major disaster" must have been declared by the President in accordance with the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170).

76. 76 Order of Return Q: If the amount of Return reduces the Pell Grant to zero and the student has received or is eligible to receive the ACG or SMART Grant, will the student remain eligible for the new grant or must the student repay the new grant because s/he is no longer eligible once the Pell is fully repaid? A: The student was a recipient of the Pell Grant at the time the ACG/SMART grant was disbursed and otherwise eligible; therefore, the full repayment of the Pell as a result of R2T4 does not make the student ineligible for the new grant.

77. 77 LEAP/SLEAP/GEAR-UP SSS Grants Q: When a student withdraws on or after July 1, 2006, and the student has one or more of these grants, what happens in the R2T4 calculation? A: The amount of the grants listed above would not be included in the Return calculation with withdrawal dates on or after July 1, 2006.

78. 78 ACG/SMART Grants Q: If a student withdraws and was awarded a second year ACG or SMART grant, but the school did not have the student’s GPA, may the grant amount be included in the R2T4 calculation as “aid that could have been disbursed?” A: No. The school has to have the GPA before either grant can be included as aid that could have been disbursed. Note that the school has up to 45 days from the date of determination to perform the R2T4 calculation.

79. 79 Compliance Self-Monitoring R2T4 is one of the most common audit findings –Use our free software –Ease of use –Use reports to manage the process and assure compliance

80. 80 Compliance Self-Monitoring

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85. 85 Compliance Self-Monitoring How do I access R2T4OTW? It’s Easy! Signup via SAIG Enrollment website –https://www.fsawebenroll.ed.gov/PMEnroll Note: The R2T4 Web Application when available will be accessed via FAA Access https://fafsa.ed.gov/faa/faa.htm

86. 86 Compliance Self-Monitoring CUSTOMER SERVICE Software Support –CPS/WAN Technical Support CPSSAIG@ed.gov (800) 330-5947

87. 87 Compliance Self-Monitoring CUSTOMER SERVICE Policy –ED's Customer Support center fsa.customer.support@ed.gov (800) 433-7327

88. 88 Thank You ! Brian.Kerrigan@ed.gov (202) 219 -7058 Dan.Klock@ed.gov (202) 377- 4026