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 Treatment of Title IV Aid When a Student Withdraws

The law specifies how an institution must determine the amount of Title IV program assistance that a student earns if he withdraws from school. The Title IV programs that are covered by this law are: Federal Pell Grants, Iraq and Afghanistan Service Grants, TEACH Grants, Direct Loans, Direct PLUS Loans, Federal Supplemental Educational Opportunity Grants (FSEOGs), and Federal Perkins Loans.

Though a student’s aid is posted to his account as soon as all FA requirements are completed, a student earns the funds as he completes the period. If a student withdraws during his payment period or period of enrollment, the amount of Title IV program assistance that a student has earned up to that point is determined by a specific formula. If a student, his parent or the institution received (on the student’s behalf) less assistance than the amount the student earned, he may be able to receive those additional funds. If the student received more assistance than he earned, the excess funds must be returned by the institution and/or the student.

The amount of assistance the student has earned is determined on a pro rata basis. For example, if the student completed 30% of his payment period or period of enrollment, he earned 30% of the assistance he was originally scheduled to receive. Once a student has completed more than 60% of the payment period or period of enrollment, he has earned all the assistance that he was scheduled to receive for that period.

If a student did not receive all of the funds that he earned, he may be due a post-withdrawal disbursement. If his post-withdrawal disbursement includes loan funds, the institution must get the student’s permission before the funds can be released to the institution. A student may choose to decline some or all of the loan funds so that he does not incur additional debt. The institution may automatically use all or a portion of the student’s post-withdrawal disbursement of grant funds for tuition, fees, and room and board charges. The institution will need the student’s permission to use the post-withdrawal grant disbursement for all other school charges. If the student does not give your permission, he will be offered the funds. However, it may be in the student’s best interest to allow the school to keep the funds to reduce his debt at the school.

There are some Title IV funds that a student may be scheduled to receive that cannot be disbursed to him once he withdraws because of other eligibility requirements. For example, if a student is a first-time, first-year undergraduate student and he has not completed the first 30 days of his program before he withdraws, the student will not receive any Direct Loan funds that he would have received had he remained enrolled past the 30th day. If the student, his parent or the institution received (on the student’s behalf) excess Title IV program funds that must be returned, the institution must return a portion of the excess equal to the lesser of:

1. The student’s institutional charges multiplied by the unearned percentage of his funds, or

2. the entire amount of excess funds.

The institution must return this amount even if it didn’t keep this amount of your Title IV program funds. This could create a balance owed to the institution by the student.

If the institution is not required to return all of the excess funds, the student must return the remaining amount.

Any loan funds that the student must return, he (or his parent for a Direct PLUS Loan) repay in accordance with the terms of the promissory note. That is, the student will make scheduled payments to the holder of the loan over a period of time.

Any amount of unearned grant funds the student must return is called an overpayment. The maximum amount of a grant overpayment that a student must repay is half of the grant funds he received or was scheduled to receive. A student does not have to repay a grant overpayment if the original amount of the overpayment is $50 or less. The student must make arrangements with the institution or the Department of Education to return the unearned grant funds. Students who owe a balance as a result of an overpayment are not eligible for any additional Title IV aid until the balance has been satisfied.

The requirements for Title IV program funds when a student withdraws are separate from any refund policy the institution may have. Therefore, a student may still owe funds to the institution to cover unpaid institutional charges. Your school may also charge you for any Title IV program funds that the school was required to return.

Students considering dropping or withdrawing can begin the process by completing the Registration Form.