The Department of Education previously released updated guidance on June 16, 2020 for schools that were affected by the COVID-19 pandemic. Though we are expecting another update to the original Electronic Announcement (051520 EA), with schools going back to the classroom (or virtual classroom) and developing hybrid models, many challenging scenarios and questions on how to interpret the Department’s guidance are arising.
Returning Title IV Funds and Qualification for R2T4 Relief
The CARES Act allows institutions to waive the requirement to return Title IV funds because of a student withdrawing due to a qualifying emergency. According to the Office of Postsecondary Education, schools are not required to return Title IV funding for students that began attendance in a payment period or period of enrollment from March 13, 2020 to December 31, 2020 (or the end date of the national emergency) and that withdrew from the school as a result of COVID-19.
But how do you know if a withdrawn student qualifies for the relief and if their case is COVID-19 related?
Any school that moved from a traditional brick-and-mortar setting to online/distance learning or had other interruptions in instruction during the covered timeframe may consider ALL withdrawals during that period COVID-19 related. If a school did not encounter any changes in the way instruction was offered (for example, already having been a distance education program), then a school will need to obtain a written attestation from the student with an explanation of why their departure was a result of a COVID-19 emergency.
When a qualified student withdraws, perform the R2T4 calculation as you normally would, but do not make any adjustments to the Common Origination and Disbursement (COD) website or the student’s account ledger for any refunds that may appear due from the R2T4. Remember, you have to also make note in the student’s file when you apply the CARES Act R2T4 waiver. Make sure to keep exceptional records when applying a student waiver.
The Department is still developing the process for schools to fulfill these reporting requirements but have determined that schools will need to include:
- The identifying information for each student the R2T4 waiver was applied
- The payment period start and end dates in which the student withdrew
- The amount of Title IV funds each student received for that payment period in which they withdrew
- The total amount of Title IV funds that were not returned to the Department as part of the R2T4 calculation
Post-Withdrawal Disbursements (PWDs)
Whenever aid is disbursed to a student’s account after their last day of attendance, the Department looks at those payments as inadvertent overpayments or post-withdrawal disbursements (PWDs). Unfortunately, PWDs of Federal Direct Loans come with stricter guidelines than Pell Grant PWDs. Normally, if a student is eligible for a loan PWD, authorization from the student (or parent) would need to be received when the student is in their first payment period or completed their period of enrollment. If a student drops somewhere in between, then loan PWDs become prohibited. With the release of this recent Electronic Announcement, some wording used in the guidance could cause confusion in relation to loan PWDs. For example, the phrases: “A situation that would normally result in a post-withdrawal disbursement” and “the institution should proceed with making any remaining disbursements for the payment period.”
Essentially, it was determined that the CARES Act permits a school to disburse all Title IV aid for which a student was eligible at the time of the withdrawal for students that are eligible for the CARES Act R2T4 relief. This means that, in many cases, students will be eligible to receive disbursements of Direct Loan funds as late disbursements, which they normally would not be permitted to receive (because the disbursement would have been a late second or subsequent disbursement). In addition, a school can disburse what would normally be a Direct Loan PWD without receiving borrower confirmation, since the Department does not consider disbursements subject to CARES Act relief to be PWDs as defined under 34 CFR 668.22.
However, there are other situations where the relief-eligible student would not qualify to receive a disbursement after withdrawal, as the student was ineligible to receive the disbursement at the time of the withdrawal. Such situations could include a student that had an enrollment status of less-than-half-time at the time of the withdrawal or a first-time borrower not meeting the 30-day delay requirement before withdrawing. In these instances, the school would not make a disbursement of Direct Loan funds after the student’s withdrawal, since the student was not eligible to receive the disbursement at the time of the withdrawal.
There are many additional questions and concerns schools and auditors may have in regard to COVID-19 related refund calculations and regulations. Unfortunately, we are at the mercy of the Department of Education as they develop and release updated Electronic Announcements.
Still have questions but want to hear the answers straight from the horse’s mouth? The Department’s Policy Implementation and Oversight group should be releasing additional guidance soon, but send your questions or comments to COVIDemail@example.com. An updated Q&A is also expected, so you may find that your questions helped with the development of new guidance.
Please contact our team for more guidance.