NASFAA National Conference

Seattle, Washington -- July 5 - 8, 2006

Washington State Convention & Trade Center

Return of Title IV Funds Updated for Changes from the

Higher Education Reconciliation Act of 2005, P. L. 109-171

Brian Kerrigan

Dan Klock

Today’s Agenda

• DCL issues

• Regulation changes from HERA

• R2T4 calculation with HERA changes

• Training on R2T4

• Compliance self-monitoring

• Questions & answers

Presentation Objectives

• Bring you up to date on R2T4 changes

• Notify you of training opportunities

• Demonstrate changes in calculation

• Understand that R2T4 non-compliance is a top finding

Dear Colleague Letter GEN-04-03

• 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

Title IV Credit Balances

• Hold Title IV credit balance until R2T4 calculation is completed

• Credit balance is “Aid Disbursed”• Determine if credit balance changes

because of refund policy or R2T4• Use credit balance to repay Title IV grant

overpayment on behalf of student• Release credit balance within 14 days

Aid That Could Have Been Disbursed

• All aid for period, if conditions for late disbursement met before student withdraws (668.164(g)(2))

• However, if limitations apply, aid may not be paid to student (668.164(g)(4))

Conditions for a Late Disbursement

• All student aid (including Pell) - ED processed SAR/ISIR with official (not necessarily valid) EFC (not needed for PLUS)

• FFEL/Direct Loan - loan certified or originated

• Perkins/FSEOG – award made

Limitations on Making a Late Disbursement

• No second or subsequent disbursement of FFEL/DL, unless student completes period

• No FFEL/DL unless student completes 30-day delay period

• 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

Verification • Must complete R2T4 within 45 days

• If verification not completed

– Return interim disbursements of aid subject to verification

– Include unsubsidized and PLUS loans in R2T4.

• If verification completed later, but within verification timelines -- new R2T4 calculation using additional eligible aid

No Passing Grades

• Institution must have process for determining if student completed

• No passing grade, institution must document completion of period

• Grading policy that differentiates between failing, completed; and failing, did not complete

Withdrawal from a 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 self-paced program

Date of Determination that Student Withdrew – School

Required to Take Attendance

• Usually 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

HERA Regulation Changes

Remember !• The Department has not yet issued regulations to

implement the provisions of the Higher Education Reconciliation Act of 2005. Program participants, including institutions, lenders, and guarantee agencies, should implement the provisions of the Act in accordance with subregulatory guidance provided by the Department in Dear Colleague Letters and other materials until the regulations are published and effective. In general, the regulations will be effective 30 days after they are published in the Federal Register.

Programs Specified for R2T4

• Perkins • Direct Loan• FFEL• Pell Grant• Academic Competitiveness Grant• National SMART Grant• FSEOG

Postwithdrawal Disbursement

• Credit grant for tuition and fees & room and board (without authorization) and for other charges (with authorization)

• Credit loan for tuition and fees & room and board (without authorization) and for other charges (with authorization) – But only after student / parent confirms that

(s)he wants loan funds in response to written notification

Written Notification• Within 30 days of date of determination of

withdrawal• Identifies type and amount of loan funds to be

credited, and type and amount of grant and loan funds available as direct disbursement

• Asks if student / parent wants loan funds credited

• Asks if student / parent wants grant or loan funds as direct disbursement

Written Notification

• Explains that student / parent can accept some or all of aid

• Explains that if student / parent declines credit of loan, (s)he may not receive direct disbursement of loan unless institution agrees

• Explains obligation to repay loan • Explains 14 day (or later) response time

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

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 from the student / parent, no loan may be credited to account and no grant or loan may be disbursed directly

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%• Scheduled clock hours must be -

- established prior to beginning of classes (or modified before withdrawal date)

- consistent with published materials- consistent with accrediting agency / state

Aid Student Returns

Grant overpayment protection• 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 grant overpayments for students

residing in, employed in, or attending institutions located in declared disaster areas

Return of Funds Order

• Loan Programs

• Pell Grant Program

• Academic Competitiveness Grants Program

• National SMART Grants Program

• FSEOG Program

R2T4 Worksheets/Software

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

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

• 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

• Box G. Total of all aid disbursed or could have been disbursed

– Used to determine the amount of TIV aid earned

Step 2: Percentage of TIV Aid Earned

• Credit-hour program - same as pre-HERA• If % is > 60% = 100% TIV 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

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)

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

• Amt earned = Amt disb’d = No action required

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

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)

Step 6: Return of Funds by the School

• Grants

• Pell Grant

• Academic Competitiveness Grant

• National SMART Grant

• FSEOG

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

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

• 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

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

NEW: Amount of TIV grant protection:Total of TIV grants disbursed or could have been disbursed X 50% = the protected amount

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

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

Student A• Pell Grant - $2025• Student attended 10%• Earned and unearned:

10% X $2,025 = $202.50 amount earnedAmount to be returned:$2,025 - $202.50 = $1,822.50

Amount school returns:$1,000 X 90% = $900 *

[The lesser of $1,822.50 or $900]

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)

Student B• Pell Grant - $500, SMART - $2,000, FSEOG -

$1,000 • Student attended 10%• Earned and unearned:

10% X $3,500 = $350 amount earnedAmount to be returned: $3,500 - $350 = $3,150

Amount school returns:$1,000 X 90% = $900 *

[The lesser of $3,150 or $900]

Student BInitial amount student owes:

$ 3,150 less $900 = $2,250Amount of TIV grant protection:

$3,500 X 50% = $1,750Amount of TIV grant funds for student to repay

$2,250 less $1,750 = $500 [Since Pell fully repaid, goes to SMART]

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

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.

Postwithdrawal 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.

Postwithdrawal DisbursementsQ: What are the notification requirements?

A: 1. The notification must be written2. Must request confirmation to credit loan funds to the student’s account (also need 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

Postwithdrawal 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 school6. 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

Postwithdrawal Disbursements

7. Must explain the obligation to repay8. 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 account9. If confirmed, the PWD must be made within 120 days of the date of determination by the school that the student withdrew

Postwithdrawal 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

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.

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.

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.

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:

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.

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).

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.

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.

HERA Revised R2T4 Software Q: If the new software is not implemented until after

July 1, 2006, what should schools do to remain in compliance with 34 CFR 668.22?

A: First, the period for the school to complete the calculation and return the funds is increased from 30 days to 45 days, effective July 1, 2006. Second, while the estimated software availability date is early August of 2006, the paper worksheets should be available prior to the software.

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.

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

Compliance Self-Monitoring

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Compliance Self-Monitoring

• How do I access R2T4OTW? • It’s Easy!

• SIGNUP!– 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

Compliance Self-Monitoring

• CUSTOMER SERVICE • Software Support

• CPS/WAN Technical Support– CPSSAIG@ed.gov– (800) 330-5947

• Policy • ED's Customer Support center

– fsa.customer.support@ed.gov – (800) 433-7327

Thank You ! Brian.Kerrigan@ed.gov

(202) 219 -7058Dan.Klock@ed.gov

(202) 377- 4026