Can We Hold the Title IV Credit Balance Until the Next Award Year If We Refund Institutional Charges Due To Coronavirus?

Scenario: As a result of the COVID-19 outbreak, we are planning to refund a portion of the student's institutional charges for room and board this year. We are also considering a partial refund of tuition and fees.

Answer: No, you cannot hold a Title IV credit balance on a student's account until the next award year/academic year, not even with the student's permission. Schools are reminded that all cash management regulations in 34 CFR 668.164 and 668.165 still apply. For example, Title IV credit balances still must be delivered within required timeframes under 668.164(h)(2):

"(2) A title IV, HEA credit balance must be paid directly to the student or parent as soon as possible, but no later than—

(i) Fourteen (14) days after the balance occurred if the credit balance occurred after the first day of class of that payment period; or

(ii) Fourteen (14) days after the first day of class of a payment period if the credit balance occurred on or before the first day of class of that payment period."

Under 668.165(b), the school can hold Title IV funds on the student's ledger account for subsequent payment periods within the same award year, but only with the student's written permission to do so. Even then, the school must "pay any remaining balance on loan funds by the end of the loan period and any remaining other title IV, HEA program funds by the end of the last payment period in the award year for which they were awarded."

Under 668.164(h)(1), a Title IV credit balance only occurs whenever the amount of Title IV federal student aid funds credited to a student's ledger account for a payment period exceeds the amount assessed the student for allowable charges associated with that payment period. The order in which institutional and federal funds are applied to the student's account does not matter in this calculation. Guidance on how to calculate a Title IV credit balance can be found on page 4-51, with an example on page 4-52, of the 2019-20 FSA Handbook. Title IV rules only apply to Title IV credit balances as defined in 668.164(h) and not to credit balances caused by non-Title IV funds. See Volume 4, Chapter 2 of the FSA Handbook for more on Title IV credit balances.

Note: Once you deliver the Title IV credit balance to the student or parent for the current award year, those funds belong to the student or parent and must be used to cover educational expenses. If the student or parent then uses those funds to make an advance payment towards next year's charges, it is a payment on the student's account for next year and not estimated financial assistance (EFA) for either award year. This is different from the limited scenario when the school delays a refund of institutional charges and provides an institutional credit towards next year's institutional charges, in which case it is EFA next year. See AskRegs Knowledgebase Q&A, Is It EFA If a School Delays a Refund Of Institutional Charges Until the Following Academic Year Due To Coronavirus?

The school will want to be very careful that it is not seen as intentionally trying to circumvent these regulations. NASFAA understands the burden this may cause some schools and has asked for leniency from ED. If that should happen, we will update this AskRegs Q&A and notify schools via Today's News.

Reference the April 3, 2020 Electronic Announcement for additional guidance when a school is unable to comply with cash management regulations due to COVID-19 disruptions.