CLARIFICATION OF R2T4 GUIDANCE RELATED TO THE COVID-19 NATIONAL EMERGENCY

Last month ED’s Office of Postsecondary Education offered reminders and clarification related to the R2T4 guidance released in May 2020 which required institutions to waive returns under the Return to Title IV requirements for any student who withdrew as a result of COVID-19 during payment periods or periods of enrollment during the national emergency.

Institutions have already had to add the Coronavirus Indicator to any disbursement in the Common Origination and Disbursement (COD) System for affected students, and soon schools will have the ability to report the amount of Title IV funds they did not return via a new lump sum reporting tool expected to be launched on COD later this month. To assist schools in determining when it is appropriate to apply the blanket R2T4 waiver, ED provided the four following examples.

Example 1

An institution offering ground-based instruction during the spring term of 2020 (January 18 to May 15) switched to a 100 percent distance education format on March 20 of that year due to the COVID-19 pandemic. During the spring semester, 30 students withdrew from their respective programs of study. The institution was able to consider all of those students (including those who withdrew at the very beginning of the term) to have withdrawn as the result of circumstances related to the COVID-19 national emergency. The Coronavirus Indicator in the COD System was set for each of the spring term disbursements for these students.

Example 2

The same institution continued offering instruction in a 100 percent distance format during the subsequent summer term. Nine students withdrew during the summer term. However, only three of those students provided written attestations explaining why their withdrawals were the result of the COVID-19 pandemic. The institution set the Coronavirus Indicator for those three students’ summer term disbursements in the COD System. For the remaining six students who withdrew for reasons not related to the Coronavirus pandemic, the institution did not set the Coronavirus Indicator and returned Title IV funds according to the R2T4 calculations performed for those students. Even though instruction continued in a distance education mode, no disruption occurred in the summer term. Accordingly, it would not have been correct for the institution to consider all nine students who withdrew to have done so as the result of a COVID-19 related circumstance.

Example 3

Another institution had been offering instruction in a 100 percent distance education format due to the pandemic but returned to ground-based instruction at the beginning of the fall 2020 term. However, during that term an outbreak of COVID-19 cases on campus caused the institution to return to 100 percent distance education. During the fall semester, 25 students withdrew from their respective programs. The institution was able to consider all 25 withdrawals to be the result of COVID-19 related circumstances and set the Coronavirus Indicator for all 25 students’ fall term disbursements. The institution was able to do this because another disruption occurred in that term.

Example 4

Prior to the pandemic, a different institution offered some programs on campus and some programs solely through distance education. The institution ceased ground-based instruction on March 27, 2020 due to the COVID-19 pandemic and moved all coursework online, but no disruption occurred to programs that were already offered online without any in-person instruction. During the spring semester, 20 students withdrew from a program that had previously been offered on campus and had been moved online due to the pandemic, and 10 withdrew from online programs where no disruption to instruction had occurred. The institution was able to consider all students who withdrew from the previously ground-based programs to have withdrawn due to COVID-19. However, it would not have been correct for the institution to consider the 10 students who had withdrawn from the online programs that had not experienced a disruption to have withdrawn due to COVID-19 without a written attestation from each student to that effect.

HEERF AUDIT GUIDANCE FOR PROPRIETARY SCHOOLS RELEASED

ED’s OIG just released the audit guide for proprietary schools that received HEERF funds under the CARES Act, CRRSAA, and the American Rescue Plan. According to the electronic announcement, a proprietary school must have a compliance audit conducted of its administration of the HEERF grant programs for any fiscal year during which the eligible school expends $500,000 or more in total HEERF grant program funds or is on Federal Student Aid’s Heightened Cash Monitoring 1 or 2 list in a fiscal year in which it expended any HEERF grant program funds. The HEERF compliance audit must be conducted in accordance with Generally Accepted Government Auditing Standards, issued by the Comptroller General of the United States, and the Guide. To satisfy the HEERF compliance audit requirement, the Guide requires an examination-level attestation engagement. Schools must submit their audit report package by July 29, 2021 or the submission deadline of their Title IV audit, whichever is later.

TEMPORARY EXEMPTION ALLOWS STUDENTS TO GET SNAP

The Supplemental Nutrition Assistance Program (SNAP) provides nutrition benefits to supplement the food budget of needy families so they can purchase healthy food and move toward self-sufficiency. To help ease the strain faced by vulnerable populations throughout the pandemic, eligibility for SNAP benefits has been expanded temporarily to allow students who are enrolled in postsecondary education to qualify if they meet certain criteria.

Under SNAPs normal rules students who enrolled at least ½ time weren’t eligible for benefits. The Consolidated Appropriations Act of 2021 signed by former President Trump expands eligibility to now include students who are either eligible for Federal Work Study or students who have a zero EFC on their SAR/ISIR.

Although students will still have to meet other criteria to be eligible for SNAP and receive benefits. Colleges can inform students of this benefit and help make referrals to state agencies that administer these benefits. According to the recent electronic announcement, there are several documents a financial aid office may provide to a student to assist them in applying for SNAP benefits.

  • Verification of eligibility to participate in a work study program (including the Federal Work-Study (FWS) program) may be found on the financial aid award letter provided to the student by the institution of higher education, or in a letter from the institution of higher education provided to the State at the request of the student.
  • Verification of an expected EFC of 0 may be found on a financial aid award letter or Student Aid Report (SAR), or in a letter from the institution of higher education provided to the State at the request of the student.
  • In addition, all students receiving the maximum Federal Pell Grant have an EFC of 0. In the 2020-21 award year, the maximum Pell Grants are $3,172 per semester for students enrolled full-time, $2,379 per semester for students enrolled three-quarter-time, and $1,586 per semester for students enrolled half-time. Verification of the Pell Grant amount may be found on the financial aid award letter and may be used as verification that a student has an EFC of 0. However, not all students with an EFC of 0 receive a Pell Grant. For instance, students may not receive an award if they do not meet other student eligibility requirements such as completing Federal verification.

FSA provided one other key reminder – you must obtain prior written consent of the student, before sharing FAFSA data with any State agency or entity for the purposes of applying for or receiving SNAP benefits.

FY 2018 3-YEAR DRAFT COHORT DEFAULT RATES RELEASED

On February 22, 2021, the Department of Education distributed the FY 2018 3-Year Draft Cohort Default Rate (CDR) notification packages to schools via their Student Aid Internet Gateway (SAIG) mailbox. The package includes a cover letter and Loan Record Detail Report (LRDR). It’s important for schools to review their draft data because there are sanctions for schools with high cohort default rates and benefits for schools with low ones and the draft cycle is one of the only opportunities to challenge certain data.

 

The Fiscal Year 2018 3-Year Draft CDR is calculated by dividing the number of borrowers who entered repayment in 2018 by the number of borrowers who entered repayment in 2018 and defaulted in 2018, 2019 or 2020.

 

Although there are no sanctions or benefits associated with the draft rates themselves, the draft rates will become official in September. During the draft cycle, schools have an opportunity to challenge incorrect data or challenge their (low) participation rate. The challenge and appeals cycle begins on March 2, 2021 and lasts for 45 days. More information about submitting an Incorrect Data Challenge or a Participation Rate Index Challenge can be found in the Cohort Default Rate Guide,

 

Benefits

A school whose most recent official cohort default rate is less than 5.0 percent and is an eligible home institution that is originating loans to cover the cost of attendance in a study abroad program may disburse loan proceeds in a single installment to a student studying abroad regardless of the length of the student’s loan period and may choose not to delay the disbursement of the first installment of loan proceeds for first year first-time borrowers studying abroad.

 

A school with a cohort default rate of less than 15.0 percent for each of the three most recent fiscal years for which data are available, including eligible home institutions and foreign institutions, may disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period and may choose not to delay the first disbursement of a loan for 30 days for first time, first-year undergraduate borrowers.

 

Sanctions

If a school’s three most recent official cohort default rates are 30.0 percent or greater for the three-year calculation it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.

 

If a school’s current official cohort default rate is greater than 40.0 percent, for the three-year CDR calculation, it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.

FY 2018 DRAFT COHORT DEFAULT RATES COMING SOON

The U.S. Department of Education is set to release the Fiscal Year 2018 3-Year Draft Cohort Default Rates on February 22, 2021.

The Draft 3-Year Cohort Default Rates (CDR) for Fiscal Year 2018 is calculated by dividing the number of borrowers who entered repayment in 2018 by the number of borrowers who entered repayment in 2018 and defaulted in 2018, 2019 or 2020. In 2020 repayment on federal student loans was paused as a result of pandemic. Borrowers who were in default were taken out of default and their loans were put into forbearance. ED has been silent as to how this will affect a school’s cohort default rate, but it seems logical to assume that there should be no defaulters on a school draft CDR for 2020. Let’s see.

As with any other year, schools have 45 days from receipt of the report to submit challenges and appeals during the draft cycle. Although there are no sanctions associated with the draft rates, schools should review the data used to calculate the rate for accuracy, because this data forms the basis of a school’s official cohort default rates which come out in September. A school that fails to challenge the accuracy of its draft cohort default rate data through an Incorrect Data Challenge may not contest the accuracy of the same cohort data when it receives its official cohort default rate when it comes out later this year on September 27.

What are the sanctions for schools that have a high Cohort Default Rate?

When a school’s three most recent official cohort default rates are 30.0 percent or greater for the three- year calculation:

    • A school will lose Direct Loan and Federal Pell Grant Program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.
    •  When a school’s current official cohort default rate is greater than 40.0 percent, for the three-year CDR calculation:
    • A school will lose direct Loan Program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two years.