COVID-19 TITLE IV FAQ WEBSITE UPDATE – R2T4

ED’s Office of Postsecondary ED released an update to the COVID-19 TITLE IV Frequently Asked Questions last month, clarifying the rules for COVID related R2T4s. 

Q: Is the R2T4 waiver under the CARES Act mandatory, or may an institution opt to continue returning funds to the Title IV programs even for those students whose withdrawals are the result of circumstances related to the COVID-19 emergency?

A: Section 3508 of the CARES Act provides that the Secretary shall waive the requirement to return funds under the Return of Title IV Funds requirements for students who withdraw from a payment period or period of enrollment as a result of a qualifying emergency. This effectively means that no statutory basis exists for returning Title IV funds for these students for the duration of the period covered by the waiver. 

The May 15, 2020 Electronic Announcement (EA) outlines how institutions can comply with the CARES Act requirements relative to situations where a student’s withdrawal is determined to be COVID-19 related, i.e., maintain all Title IV funds on the student’s ledger account, disburse any funds the student was eligible to receive that were not disbursed prior to the withdrawal, and make no adjustments to disbursement amounts reported in COD.

The Department is aware of concerns over the possibility that students who withdraw as the result of circumstances related to the COVID-19 emergency will seek payment of the credit balances that may be left on their accounts since their institutions are not required to return any Title IV funds. As a result of CARES Act relief, these students would also not be required to repay Direct Loan funds disbursed for the payment period or period of enrollment in which they withdrew, nor would their Pell lifetime eligibility or Subsidized Loan usage be affected by their receipt of Title IV aid for the period. This would occur in situations where the student receives a substantial or total reduction of institutional charges due to the withdrawal, in effect creating what may have been an unintended student credit balance from the unreturned Title IV funds.

Accordingly, in these situations we will permit institutions who have written authorization from the student, to apply the remaining amount of a student’s credit balance from these Title IV disbursements (after all charges on the student’s account are paid) to reduce Direct Loan disbursements received for attendance at the institution for periods prior to the payment period in which the student withdrew. The institution must obtain this authorization (which may be electronic) from the student prior to applying his or her credit balance for this purpose.  The institution must also notify any affected student of the action and the amount that was repaid, and the institution must return the Direct Loan funds in the COD and G5 systems. An institution may only exercise this authority for Direct Loan award years that are currently open.  If the amount of the student’s credit balance resulting from CARES Act R2T4 relief exceeds the amount of Direct Loan disbursements received for prior periods, the institution may, with written authorization, use the credit balance to pay down the prior Direct Loan disbursements, but must provide the remaining credit balance amount directly to the student.

Regarding the concern that a student may falsely report circumstances related to the COVID-19 emergency, the Department is unaware of widespread abuse occurring in this area. However, if an institution has cause to doubt that a student’s written attestation that his or her withdrawal is COVID-19 related, it may request any additional documentation reasonably necessary to determine the accuracy of the attestation. This conforms with the requirement to identify and resolve conflicting information under 34 CFR 668.16(f). (Published October 5, 2020) 

TITLE IV FUNDS MUST NEVER ESCHEAT TO A THIRD PARTY

At schools that issue paper checks to students for credit balances, the check issuing process is often handled by someone removed from the financial aid and student accounts functions. Check processing is typically handled by an accounts payable employee or someone similar in the back accounting office. The same goes for EFT/ACH transactions. When a school issues a check, EFT or ACH payment to a student that results from a Title IV Credit Balance, it must have a process in place to ensure that the funds are delivered to the student and never escheat to a third party. 

A school’s credit balance process must ensure that FSA funds never escheat to a state, or revert to the school, or any other third party. All Title IV Credit Balances must be issued to the student (or parent for PLUS loan funds). However, if after attempting to deliver the funds to a student the school determines it is not possible to do so, funds must be returned to the Department of Education.

All Title IV funds, except FWS Program funds that a school attempts to disburse directly to a student or parent must be returned to the Department if the student or parent does not receive the funds or cash the check. For FWS Program funds, a school is required to return only the Federal portion of the payroll disbursement. If a school attempts to disburse a credit balance by check or EFT and the check is not cashed or the EFT is rejected, the school must return the funds no later than 240 days after the date it issued that check or made the EFT. Therefore schools should have a process to ensure that all student disbursement checks (including EFT and ACH) are cashed within 240 days or otherwise returned to the department.  This rule is applicable to all credit balances of one-dollar or more.

Schools are required to abide by the federal regulations which govern how FSA funds must be managed and those that fail to have adequate systems in place run the risk of administrative capability findings in annual audits and program reviews.

WHAT TO DO WITH EXCESS INTEREST EARNED ON TITLE IV FUNDS

Did you know that ED requires schools to return excess interest earned on federal title IV funds each year?

Institutions must maintain their Title IV, HEA program funds in an interest-bearing depository account. Interest may accrue throughout the year and schools may keep up to $500 in interest earned on Title IV funds. At the end of each award year, any interest earned in excess of the 500 dollar threshold must be returned to the federal government. This is called “excess interest”. Unlike Title IV funds, excess interest gets returned to the Department of Health and Human Services (HHS) through the HHS Payment Management System (PMS). http://bit.ly/2qkA5cz

PMS is the central collection point for interest earned on federal grants. Schools may no longer remit excess interest through G5 and instead must remit excess Title IV interest to HHS’s Payment Management System and must do so within 30 days after the end of each award year.

According to a recent electronic announcement, the return of interest should be made payable to Department of Health and Human Services. Institutions must include with the remitted interest:

  • An explanation stating that the refund is for excess interest,
  • U.S. Department of Education-Federal Student Aid as the name of the awarding agency, and
  • The institution’s Data Universal Number System (DUNS) number in the addendum record or other correspondence.

The electronic announcement also states that the instruction above vary somewhat with the instruction under Returning Interest on the HHS webpage, which, for example, refer to payee account and grant numbers that do not apply here and may be ignored.

Schools have three methods to return excess interest; via ACH, FedWire or by mailing a paper check to HHS Program Support Center in Atlanta, GA (and not to the Rockville Maryland Address that was included in the regulations).

For more information refer to the May 19, 2017 Electronic Announcement from Federal Student Aid here: http://bit.ly/2rpL2cI

The deadline for the 2016-2017 award year is July 30, 2017.