Session # 25

R2T4 COMPLIANCE
ISSUES
Dan Klock
Federal Student Aid
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 Issues
R2T4 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 • Not Required to
Attendance Take Attendance

– When the student - When the student

begins the official begins the
withdrawal process at official withdrawal
the school process at the
– When student exceeds school
the institution’s policy – The date the institution
on unexcused
becomes aware that
absences, not more
than two weeks after the student has ceased
the withdrawal date attendance

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Collection of Withdrawal Info. – Withdrawal
Date
• Required to Take • Not Required to Take
Attendance Attendance
– Begins the formal
– The last recorded date
withdrawal process
of attendance from – Date student provided
the institution’s intent to withdraw
attendance records – 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,
use
payment period.
• For a non-term based or non-
standard term program, use
payment 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 completed
calendar 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 Calculation
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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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
Crediting PWD to Account
Grant­Credit direct cost, w/auth
   indirect costs
Loan­Notify student/parent
Direct Disbursement
Grant­Receive confirmation
Loan­Receive confirmation
HERA Rule
Crediting PWD to Account
Grant – Credit direct cost, 
  w/auth indirect costs
Loan­Notify and receive 
  confirmation
Direct Disbursement
Grant­Notify & 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/P

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
equal
Academic 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 complete

8 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, or
Pell 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 = $1,437
PP 2 = 6/30 * $4,310 = $ 862
PP 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 = $718
D. Total Title IV Aid disbursed or Could Have
Been Disbursed for the R2T4 calculation:
Loan PP 1 = $1,750
Pell 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.

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QUESTIONS ?
Thank You

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

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Appendix

Reminders that you can

read on your own
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

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