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As part of the Higher Education amendments of 1998, Congress passed new provisions governing what must happen to the Federal Financial Assistance if a student completely withdraws from school in any semester. This change of policy went into effect beginning with the Fall 2000 semester. The policy governs all Federal Grant and Loan Programs, including Federal Pell Grant, Federal SEOG, and Federal Direct Loans, but does not affect Federal Work-Study.
In general, the new law assumes that a student earns Federal Financial Aid awards directly in proportion to the number of days of the term attended. The portion of Federal Grants and Loans that a student is entitled to receive is calculated on a percentage basis by comparing the total number of days in the semester to the number of days completed before the withdrawal. For example, if a student completes 30% of the semester, the student has earned 30% of the assistance he/she was originally scheduled to receive. This means that 70% of the scheduled award remains unearned and must be returned to the Federal Government.
If a student completely withdraws from the College (either officially or unofficially) before completing 60% of the semester, BC3 must calculate according to a specific formula, the portion of the total scheduled financial assistance the student has earned and is therefore entitled to receive. If a student receives (or the College receives on the student’s behalf) more assistance than was earned, the unearned excess funds must be returned to the Department of Education. THIS MEANS THE STUDENT MAY HAVE TO REPAY FEDERAL MONIES THAT WERE ALREADY DISBURSED. Once a student has completed more than 60% of the semester, all (100%) of the assistance has been earned and the return of Title IV Federal Financial Aid calculation is not required.
The withdrawal date will be determined by the College as (1) the date the student begins the College withdrawal process, or the date the student officially notifies the Registration Office of the intent to withdraw; (2) the midpoint of the semester if the student withdraws without notifying the College; or (3) the last date of attendance at an academically-related activity as documented by the College.
If excess funds must be returned to the government, the College shares the responsibility of returning those excess funds. The College’s portion of the excess funds to be returned is equal to the lesser of the entire amount of the excess funds; or the total tuition and fee charges multiplied by the percentage of unearned funds. The institution is responsible to return the unearned funds as soon as possible but no later than 45 days after the date of the institution’s determination of the students withdrawal.
When excess funds are required to be repaid, the Federal Government mandates the following order for crediting the returned funds:
- Unsubsidized Direct Loans (other than Direct PLUS loans)
- Subsidized Direct Loans
- Direct PLUS Loans
- Federal Pell Grants for which a return of Title IV funds is required
- FSEOG for which a return of Title IV funds is required
- TEACH Grants for which a return of Title IV funds is required
- Iraq and Afghanistan Service Grant, for which a return of Title IV funds is required
If the College is not required to return all of the excess funds, the student must return the remaining amount. Any loan funds that the student must return are repaid according to the terms of the promissory note. If the student must return any grant funds, the law provides that the amount to be repaid is to be reduced by 50%. This means that the student only has to return half of any excess grant funds received.
Any award money the student has to return is considered a Federal Grant overpayment. The student must either repay that amount in full or make satisfactory arrangements with the Department of Education to repay the amount. The student must complete these arrangements within 45 days of the date of the College’s notification of the overpayment status or risk losing eligibility for further Federal Financial Assistance.
If the return of unearned Federal assistance causes any portion of the tuition and fees to become uncovered, the student will be billed by the College. In such cases, the student will be required to make arrangements with the Finance Office to pay the balance.
Additional information concerning these new provisions can be obtained by contacting the Financial Aid Office.
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