In cases of student full withdrawal during the first 60% of the term, semester, or billing period, the U.S. Department of Education requires the return of a portion of Title IV funds (Federal Direct Stafford loans, PLUS, Federal Pell Grant, and SEOG). The percentage of such funds considered “earned” by the student is determined by dividing the number of days prior to withdrawal by the total number of days in the term, semester or billing period, with the results expressed as a percentage rounded to the first decimal point.
The remaining percentage is considered “unearned.” The unearned percentage is applied first to applicable fees. The school returns this percentage to the federal aid programs. If this percentage of fees exceeds Title IV aid, the amount in excess of Title IV aid is generally returned first to other aid programs, with any remaining excess returned to the student.
If the Title IV aid exceeds the amount of applicable fees, the unearned percentage is applied to the funds in excess of fees. The student repays unearned loan funds in excess of applicable fees on the normal repayment schedule. However, the student is responsible for repaying 50% of the calculated unearned grant funds not attributable to the returned applicable fees.
Unearned funds are attributed to Title IV programs in the following order:
- Unsubsidized Federal Direct Stafford loans
- Subsidized Federal Direct Stafford loans
- Federal Direct PLUS loans
- Federal Pell Grant
- Federal Supplemental Grants (FSEOG)
Withdrawal date is the day the student begins the official Termination of Enrollment process or otherwise officially notifies their school’s Student Affairs Office of their intent to withdraw. For unofficial withdrawals, the latter of the 50% point in the enrollment period or the last documented date of a student’s educational activity (such as an exam or lab assignment is used. The first day of a leave of absence is considered the withdrawal date for financial aid purposes, unless the student is granted a special exemption based on the nature and length of the leave and their ability to return during the same academic period and resume studies without incurring any additional financial liability.
Return of Title IV Funds Example
Jane receives a $500 subsidized Federal Stafford disbursement and a $1000 Federal Pell grant for her 113 day long Spring semester. Her applicable fees are $1000. She signs her Termination of Enrollment Form on the 33rd day of the semester and is considered in attendance for 33 days. Therefore, 29.2% of her Title IV aid, $438, is considered earned, while 70.8%, $1,062, is considered unearned.
The school must return 70.8% of Jane’s applicable fees, $708, to her Title IV aid. The school first attributes the return to Jane’s Stafford disbursement, fully repaying the $500 to the lender, thus reducing Jane’s student loan debt. The school then returns $208 to the Federal Pell Grant program.
Jane is not off the hook yet; she still has $354 in unearned Title IV funds attributable to her Federal Pell Grant. However, federal regulations give Jane a break. She is responsible to return only half of this amount, $177, to the Federal Pell Grant program; she must return this amount or make satisfactory repayment arrangements with the U.S. Department of Education before she can receive any further Title IV student aid from any institution.