Session # 25

R2T4 COMPLIANCE ISSUES

Dan Klock Federal Student Aid

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Today’s Agenda

• R2T4 - Compliance Issues• Collection of withdrawal information• R2T4 Calculation • Notification• DCL issues• Compliance self-monitoring• Q & A

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Presentation Objectives:• Understand that R2T4 non-

compliance remains a top finding

• Today’s session will equip you to prevent R2T4 findings from occurring on your campus

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R2T4 – Compliance Issues• Return to Title IV Funds is a

“Top-10” compliance issue for institutions & FSA

• FAAs are risk managers • Maximize compliance = Minimize risk• Clear policies and procedures• Quality Control – how do you

measure up?

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R2T4 - Compliance Issues

Top Compliance Concerns:• Incorrect Refund Calculation• Return of Title IV Funds Not Made• Withdrawal Incomplete/Incorrect

/Untimely• Refunds Made Late to Title IV Funds

Account• Students Not Notified of Refund to

Lender• Notification and Confirmation of PWD

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R2T4 – Compliance IssuesR2T4 on the Web:• How many people use our Free

R2T4 OTW software? • How many people are using

someone else’s software?

• How many are doing hand calculations?

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R2T4 – Compliance Issues

Policies and Procedures:

• Standards of Administrative Capabilities– 34 CFR 668.16(b)(3) – communicates all

info received by ANY institutional office that bears on a student’s eligibility for Title IV aid to the person designated to be responsible for administering Title IV, HEA programs

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R2T4 – Compliance Issues Policies and Procedures:• Coordination among all campus

administrators• Integration between Campus Refund

policy and R2T4 policy• Clear information to students• Regular processing • Report generation and problem

resolution

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Collection of Withdrawal Info.

• Institutions required to take attendance–Outside entity has a requirement that the institution take attendance - Nov. 1,2002 change (67 FR 67073)

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Collection of Withdrawal Info. - Date of Determination

• Required to Take Attendance

– When the student begins the official withdrawal process at the school

– When student exceeds the institution’s policy on unexcused absences, not more than two weeks after the withdrawal date

• Not Required to Take Attendance

- When the student begins the official withdrawal process at the school– The date the institution

becomes aware that the student has ceased attendance

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Collection of Withdrawal Info. – Withdrawal Date• Required to Take

Attendance– The last recorded

date of attendance from the institution’s attendance records

• Not Required to Take Attendance– Begins the formal

withdrawal process– Date student provided

intent to withdraw– Midpoint – unofficial

withdrawal– The date a LOA began

for a student who does not return from an LOA

– Illness, accident, grievous personal loss, events beyond the student’s control

– Academically-related activity

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R2T4 Calculation • For a standard term based program,

usepayment period.

• For a non-term based or non-standard term program, usepayment period or period of enrollment.

• For a non-term or non-standard term based program, an institution must consistently use either a PP or POE for all students (in a category) in a particular program.

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R2T4 Calculation

Since HERA, the Percentage Earned is a one-step process

• clock hours scheduled to complete equals > 60% clock hours in the period

student has earned 100% of title IV Funds

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R2T4 Calculation• Percentage Earned is equal to –

calendar days completedcalendar days in the period

•Note: Exclude institutionally scheduled breaks of 5 or more consecutive days

•When a student has completed MORE than 60%, 100% of Title IV funds are earned

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R2T4 CalculationAid That Could Have Been Disbursed

• Old Policy -- Aid that could have been disbursed before withdrawal. Did not include - Second loan disbursement, or- Loan within first 30 days.

• New Policy -- All aid for period, if conditions for late disbursement were met before the student withdrew. (668.164(g)(2))

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

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R2T4 Calculation• After you calc the amount the student earned -

3 possibilities:– A. The amount disbursed = the amount

earned• Eureka! No further action necessary!

– B. The amount disbursed > the amount earned• The unearned portion must be returned

to the programs– C. The amount disbursed < the amount

earned• Post-withdrawal disbursement

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R2T4 Calculation

• B. The amount disbursed > the amount earned• Calculate the unearned portion from the school• Institution returns the lesser of –

• 1.) amount disbursed • 2.) institutional charges x percentage not earned

• Calculate the unearned portion that the student owes: Total unearned amt. less amt. school paid

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R2T4 Calculation

• B. The amount disbursed > the amount earned– Amount of unearned the student owes =

• Less Title IV Loans – repay in accordance with the loan repayment provisions

• Title IV Grants – the initial amount of the grant (disb’d or could have been disb’d) is multiplied by 50%, this is the amount of TIV grant funds that are protected. The amount of TIV grant funds above this amount is the amount that the student has responsibility to repay

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Notification• C. The amount disbursed < the amount

earned– Post-withdrawal disbursement (PWD)

• Credit the student’s account for direct costs with grant funds only

• Notification and confirmation – must notify the student/borrower of all loan amounts for any PWD/Late disbursement and any grant amounts that will be directly disbursed (NOTE: Nov 1, 07 Final Regs)

• Must wait for confirmation from the student/borrower– Title IV grant funds – If Title IV loan funds are credited, must notify

borrower of right to cancel or reduce loan• If PWD exceeds costs credited – institution must offer

PWD w/in 30 days of the date of determination

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Notification• Post-withdrawal disbursement

(PWD)–14-day Rule– Institutional flexibility beyond 14-day Rule

–180 days to complete the PWD (NO APPEAL)

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Notification• Grant Overpayment Notification

– 45-day period of extended eligibility•Notify student w/in 30 days of Date

of Determination that s/he must take Positive Action

– Fully repay the overpayment– Make arrangements with school to

repay– Make arrangements with ED to repay

– Institutional monitoring

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PWD Notifications/Authorizations

Prior Rule HERA RuleCrediting PWD to Account Crediting PWD to AccountGrant-Credit direct cost, w/auth Grant – Credit direct cost, indirect costs w/auth indirect costsLoan-Notify student/parent Loan-Notify and receive

confirmationDirect Disbursement Direct DisbursementGrant-Receive confirmation Grant-Notify & receive

confirmationLoan-Receive confirmation Loan- Notify & receive

confirmation

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Written Notifications - HERA

• Must ask if student/parent wants– loan credited to the account, and– grant or loan funds as direct disbursement

(Nov 1, 2007 Final removes requirement for TIV grant notification for direct disbursement)

• Must include reminder of obligation to repay loan funds

• Notification ASAP but no later than 30 days after the Date of Determination

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Written Notifications - HERA

• Student/parent can accept some or all of the aid

• Student/parent has 14 days to respond– School can give longer time, provided

the timeframe applies both to loan funds to be credited to account or directly disbursed

• If response from student/parent is late, school has the option of making the PWD

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Written Notifications - HERA

• PWD 180-day rule - Nov 1, 07 Final Regs, otherwise 120-day rule

• If student/parent declines loan funds to be credited to account, school must comply

• Student may not receive direct disbursement of loan funds that the institution wishes to credit to account unless school agrees

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Written Notifications - HERA

• If no response to the notification is received– loan cannot be credited to account– grant or loan cannot be directly

disbursed (Note: Nov 1, 07 Final Regs)• School must document results of

notification and final PWD determination

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Notifications – Final Regs• Direct disbursement of a Title IV

Grant – written notification not needed. – Must disburse ASAP, no later than

45 days after Date of Determination

• Loans – written notification ASAP but no later than 30 days after Date of Determination

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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

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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

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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

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General Provisions NPRM

• Proposed:– Eliminate 34 CFR 668.4(d), thus clock

hour and nonterm credit hour programs may not have more than 2 payment periods

– Credit hour programs with terms that are NOT substantially equal for R2T4, school must use the payment period during which the student withdrew that ends later (see graphic on next slide).

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R2T4 – Payment periods for nonstandard, credit hour programs with terms substantially not equalAcademic Year = 24 credit hours & 30 weeks of instruction Terms are 10, 6 and 14 wks in length

Payment Periods (PP): Loan – Terms 1 & 2 = 15 wks each Pell - Term 1= 10 wks, Term 2 = 6 wks, Term 3 = 14 wks.

Loan PP1 Loan PP2

WD at day 50 Expected to complete 12 hours

&15 wks of instructional time

Expected to complete Expected to complete8 hrs and 10 wks 13 hrs and 16 wks of instruction

Pell PP1 Pell PP2 Pell PP3

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R2T4 – Payment periods for nonstandard, credit hour programs with terms substantially not equal

PROPOSED:A. As of the student’s withdrawal date, determine which

payment periods ends later Loan PP 1 = 15 wks, orPell PP 1 = 10 wks,

B. Pell Payment Periods and the corresponding amount based on a Scheduled Award of $4,310:

PP 1 = 10/30 * $4,310 = $1,437PP 2 = 6/30 * $4,310 = $ 862PP 3 = 14/30 * $4,310 = $2,011

Total = $4,310

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R2T4 – Payment periods for nonstandard, credit hour programs with terms substantially not equal

PROPOSED:C. As of the student’s withdrawal date and before the R2T4 calculation, you must attribute the portion of Pell PP 2 to be included as Aid That Could Have Been Disbursed– Loan PP 1 = 15 wks– Pell PP 1 = 10 wks– Attribution for 5 wks of Pell PP 2 =

5/6 * $862 = $718D. Total Title IV Aid disbursed or Could Have

Been Disbursed for the R2T4 calculation:Loan PP 1 = $1,750Pell PP 1 = $1,437 Attrib portion of Pell PP 2 = $ 718

Total $3,905

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General Provisions NPRM

• Late disbursements – from 120 days to 180 days, but no appeal

• Crediting a student’s account for minor prior year charges – from $100 to $200

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Escheated funds - prohibited• Schools prohibited from allowing Title IV funds to

escheat (paid to a third party)– Credit balances and post-withdrawal

disbursements– School must ensure that Title IV funds are

used only for educational purposes intended– Funds cannot escheat to a third party (state or

institutional coffers)– Must have a process to identify non-negotiated

checks and return the funds to the Title IV programs before the checks are stale and escheat to an unintended third party

– When paid by check, funds must be returned within 240 days after check issued. (See 34 CFR 668.164(h)

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Dear Colleague Letter (DCL)GEN-04-03

• Title IV Credit Balances• Aid That Could Have Been Disbursed• Verification not completed before

withdrawal• No Passing Grades• Non-Term Programs• Date of Determination that Student

Withdrew• Treatment of LEAP Funds

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DCL Issues - Title IV Credit Balances

• Hold all Title IV Credit Balances until R2T4 calculation is completed.

• Credit Balance is “Aid Disbursed.”• Determine if Credit Balance

changes because of a Refund Policy or R2T4.

• Use Credit Balance to repay TIV Grant Overpayment on behalf of student.

• Release Credit Balance within 14 days.

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DCL Issues -Aid That Could Have Been Disbursed

Old Policy -- Aid that could have been disbursed before withdrawal. Did not

include - Second loan disbursement, or- Loan within first 30 days.

• New Policy -- All aid for period, if conditions for late disbursement were met before the student withdrew. (668.164(g)(2))

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

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DCL Issues – Conditions for a Late Disbursement

• All Student Aid (including Pell) - ED processed SAR/ISIR with official (not necessarily a valid) EFC. (Not needed for PLUS.)

• FFEL/Direct Loan - Institution certified or originated the loan.

• Perkins/FSEOG - Institution made the award

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DCL Issues – Limitations on Making a Late Disbursement

• No second or subsequent disbursements of FFEL/DL, unless student completes the period.

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

• No Pell Grant without a valid SAR/ISIR by the deadlines in the Federal Register.

• No 2nd pp Pell if 1st pp not completed.• No 2nd pp FFEL/DL if 1st pp not completed

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DCL – Importance of Aid That Could Have Been Disbursed

• If total aid (Aid That Could Have Been Disbursed plus Aid Disbursed) is greater, the amount earned will be greater.

• Results in a smaller amount to be returned, or in a post-withdrawal disbursement.

• Remember - Aid must correspond to the period for which you are doing the Return Calculation. (pp or period of enrollment)

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DCL Issues -Verification

• Must complete R2T4 within 30 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– School must perform new R2T4

calculation using additional eligible aid.

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DCL Issues – No Passing Grades

• School must have a 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.

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DCL Issues - Non-Term, Credit Hour Programs

•Percentage Earned is equal to calendar days completed divided by calendar days in the period.

•Project calendar days in period if student is in a Self-Paced Program.

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DCL Issues - Date of Determination that Student Withdrew for Schools 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 school’s Absence

Policy.

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DCL Issues Treatment of FWS & LEAP Funds

Law excludes FWS and (under HERA) LEAP and SLEAP are also excluded.

QUESTIONS ?

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Thank You

Dan Klockdan.klock@ed.gov(202) 377- 4026

Appendix

Reminders that you can read on your own

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Appendix•The Law & Regulations• Section 484B of the HEA

– Enacted October 7, 1998, as part of the Higher Education Amendments of 1998

• NPRM published August 6, 1999• Final Reg published November 1, 1999

– Effective Date of Reg - July 1, 2000 • Dear Colleague Letter GEN-00-24• NPRM published August 8, 2002• Final Reg published November 1, 2002• Dear Colleague Letter GEN-04-03• Dear Colleague Letter GEN-05-16• HERA Operational Implementation – June 30, 2006• NPRM published August 8, 2007• Final Regulations published November 1, 2007

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Appendix• Old approach – (refunds and repayments)• Dictated use of specific refund policies.• Determined amount of institutional charges

that a school had earned and not earned.• New approach – (Return to Title IV Funds)• Determines amount of title IV aid a student

has earned, the unearned portion is returned• “Paycheck theory” – if you aren’t there for the

entire period you owe some of the money back

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Appendix – Leave of Absence

• The previous limit to only one LOA in 12 months was eliminated in the November 1, 2002 final regulations. HERA codifies “1 or more LOAs w/in 180 days. Sec 8022

• Total leave days cannot exceed 180 in any 12-month period.

• The institution must have a formal policy that the student and institution follow.

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Appendix – Academically Related Activity

• An institution not required to take attendance MAY ALWAYS use the last date of an academically-related activity as the withdrawal date.

• The school, not the student, must DOCUMENT– That the activity is academically-

related, and – The student’s attendance at the

activity.

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Appendix – Academically Related Activity• Examples of academically-related

activities are– Examinations or quizzes,– Tutorials,– Computer-assisted instruction,– Completing an academic

assignment, paper or project,– Attending a school assigned

study group.

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Other HERA change• De minimis amount of Title IV

grant that the student has responsibility to repay increased from $25 to $50

• Sec. 8022 HERA