When a recipient of Title IV grant or loan assistance withdraws during a payment period, the institution must determine the amount of Title IV grant or loan assistance that the student earned as of the student's withdrawal date. If the total amount is less than the amount of Title IV assistance that was disbursed, the difference must be returned to the Title IV programs. If the total amount is greater than the amount disbursed, the difference must be treated as a post-withdrawal disbursement. Once the withdrawal date has been established and the calculations completed, the institution follows specified procedures for providing notification to the student (or parent, in the case of Parent Plus loans) and disbursing or returning funds. If any standing charges exist on the student's account and the student is entitled to a post-withdrawal disbursement, the institution may use some or all of the funds to cover certain charges outstanding on the student's account, such as tuition and fees.
As a requirement for making a post-withdrawal disbursement, an institution must offer to the student, or parent for Parent Plus loans, any amount of a post-withdrawal disbursement that is not credited to the student's account. In addition to this written notification of eligibility, in some cases institutions must also make the student or parent aware of the outcome of any post-withdrawal disbursement request. If a response is not received from the student or parent declining the funds, the institution does not need to make follow-up contact, and returns any funds earned by the student or parent to the Title IV program. Section 668.22(a)(4)(ii)(E), however, requires an institution to notify a student or parent when the student's or parent's acceptance of the post-withdrawal disbursement was received after the 14-day time limit for responding has elapsed and the institution does not choose to make the post-withdrawal disbursement.
Order of Return of Title IV Funds
Section 668.22(i) specifies the order in which funds are to be returned. Loans are repaid first in an order that gives highest priority for repayment to higher cost loans (unsubsidized) and lastly to Perkins loans. Section 668.22(i), the regulations will take the 50% of the unused portion of the Pell Grant at the end of the calculation, not the beginning, and thus the potential liability for students who withdraw is greater. In short, the percent of the unused portion of the Pell Grant is protected, not 50% of the original Pell Grant.
Time Frame for the Return of Title IV Funds
An institution must return the amount of Title IV funds for which it is responsible as soon as possible but no later than 45 days after the date of the institution's determination that the student withdrew. The institution must determine the withdrawal date for a student who withdraws without providing notification to the institution no later than 30 days after the end of the payment period of enrollment, academic year, or educational program, as appropriate.