Can a School Choose Not To Apply the R2T4 Waiver Under the CARES Act and Return Unearned Title IV Funds Anyway?

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This AskRegs Knowledgebase Q&A has been updated to provide clarification from the U.S. Department of Education (ED) on guidance published in Return of Title IV Funds (R2T4) Q&A #2 on the COVID-19 Title IV Frequently Asked Questions (FAQ) Website and announced in the October 6, 2020 Electronic Announcement. This new guidance represents a different understanding of a phone conversation between ED and NASFAA earlier this year.

No. According to guidance NASFAA has now reconfirmed with ED, the school must apply the R2T4 waiver if it uses the assumption method or is otherwise aware the student withdrew from the payment period or period of enrollment within the covered period (defined below) due to COVID-19.

In order to implement the R2T4 waiver, the school can choose to either:

The school is never required to use the assumption method, but if it uses the assumption method for an entire payment period for example, it must apply that policy and the R2T4 waiver to all students who withdrew during the payment period. If the school chooses to use the assumption method after a certain date within the payment period (such as for all withdrawals after February 1, 2020), it must apply that assumption and the R2T4 waiver to all students who withdrew after that February 1 date--it cannot apply the assumption method on a case-by-case basis after that date. And, just because the school uses the assumption method for one payment period does not mean it must use it for other payment periods within the covered period. See also AskRegs Q&A, Can We Have a Policy To Apply the R2T4 Waiver Only For Withdrawals After March 13, 2020 Or Another Set Date?

That said, the R2T4 waiver can still be applied to payment periods/periods of enrollment for which the school does not apply the assumption method, either because it is not eligible to use it or chooses not to use it. In order to apply the R2T4 waiver for those payment periods or periods of enrollment, the school would need individual attestations from the students indicating they withdrew due to COVID-19. A school that does not use the assumption method is not required to solicit individual attestations from all student withdrawals to see if they withdrew due to COVID-19, but they would need an attestation to apply the R2T4 waiver for a student.

In a conversation with ED earlier this year, NASFAA understood ED to say more broadly that schools had the authority to choose whether to implement the R2T4 waiver at all, or to implement the R2T4 waiver on a case-by-case basis, for broad categories of students, or on a payment period-by-payment period basis within the covered period. Our understanding was consistent with the wording of the CARES Act which specifically requires ED, not schools, to waive R2T4 requirements, as well as the fact that the  May 15, 2020 Electronic Announcement uses the term "should" (not must or required) when it comes to the schools' implementation of the waiver.

ED and NASFAA have consistently encouraged schools to implement the May 15th guidance consistently to all students in the entire payment period or period of enrollment within the covered period, not just those who withdrew after the COVID-19 qualifying emergency was declared on March 13, 2020 during the spring 2020 payment period. There are legitimate reasons why a student might have withdrawn due to COVID-19 before March 13.

So, where do schools go from here?

If the school had or has a policy to use the assumption method for the entire payment period or period of enrollment, the school needs to look back and ensure it has applied the R2T4 waiver for all students who withdrew from the entire payment period or period of enrollment. For example, if the school applied the assumption method to the entire spring 2020 term, it must apply the R2T4 waiver to all students who withdrew during the spring term.

If the school had or has a policy to use the assumption method after a certain date during an affected payment period/period of enrollment within the covered period, the school needs to look back and ensure it has applied the R2T4 waiver for all students who withdrew after the school's implementation date. For example, if the school chose to apply the assumption method only after February 1, 2020, the school needs to apply the R2T4 waiver to all students who withdrew after February 1. The school also needs to go back and check to see if it already has documentation that a student's withdrawal was COVID-related before February 1. If so, it must apply the R2T4 waiver even now. See AskRegs Q&A, How Do We Implement the R2T4 Waiver If We Are Re-Disbursing Aid We Already Returned Under the R2T4 Calculation?

According to ED, if the school had no indication the withdrawal was COVID-related before the school's February 1 implementation date, the school is not required to go back and collect attestations or apply the R2T4 waiver. Also, if a student now comes in and says his or her withdrawal before February 1 was COVID-related, schools are not required to go back and apply the waiver; this is still the school's choice.

If the school did not use the assumption method, but was otherwise already aware the student withdrew due to COVID-19 during the affected payment period/period of enrollment, it will want to check to ensure it has applied the R2T4 waiver to those students, even now.

R2T4 waiver refers to the fact that the CARES Act waives the requirement for the school or the student to return Title IV funds when a student withdraws due to COVID-19 anytime during the entire payment period that falls within the covered period.

Covered period refers to the fact that the May 15, 2020 Electronic Announcement now allows schools to apply the R2T4 waiver to: 1) payment periods or periods of enrollment that include March 13, 2020; or 2) payment periods or periods of enrollment that begin between March 13 and the later of December 31 or the last date that the national emergency is in effect. See AskRegs Q&A, How Do We Determine If a Withdrawal Was the Result Of a Qualifying Emergency Due To Coronavirus?, for important details.

Payment Period Or Period of Enrollment: Remember that standard term programs must use the standard term payment period (semester, trimester, quarter) in the R2T4 calculation; they do not have the option to use the period of enrollment. A nonterm or nonstandard term program has a choice to use either the payment period or the period of enrollment in the R2T4 calculation. Therefore, it is NASFAA's understanding (because the Electronic Announcement language is unclear) that whichever period is used in the R2T4 calculation requires a determination of whether a student withdrew during that payment period or period of enrollment due to COVID-19.

The August 21, 2020 Electronic Announcement adds: "Where an institution has opted to use the period of enrollment to calculate its returns for a non-term or non-standard term program, the waiver may apply to a student who begins attendance in a payment period that includes December 31, 2020 or the last date that the national emergency is in effect and withdraws after the conclusion of that payment period but within the applicable period of enrollment."

Title IV Credit Balances: Some schools have been concerned that students are receiving substantial Title IV credit balances generated by the R2T4 waiver and the school's own institutional refund policy. Some schools choose to have an institutional policy to refund all or part of a student's institutional charges when a student withdraws. That school policy has no bearing on the R2T4 calculation or the determination of unearned Title IV aid. Per the May 15, 2020 Electronic Announcement, "If a student who qualifies for CARES Act R2T4 relief withdraws and is granted a tuition refund, the refund may create a Title IV credit balance that must be provided to the student within 14 days." By definition under 34 CFR 668.164(h), a Title IV credit balance belongs to the student (or parent for PLUS).

The school cannot decide whether to refund that credit balance or how it is spent. However, ED now permits institutions that have written authorization from the student, to apply the remaining amount of a student’s Title IV credit balance (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. See the above-mentioned October 6, 2020 Electronic Announcement and R2T4 Q&A #2.

Notes:

AskRegs Q&As represent NASFAA's understanding of regulatory and compliance issues. They are FOR INTERNAL USE ONLY. While NASFAA believes AskRegs Q&As are accurate and factual, they have not been reviewed or approved by the U.S. Department of Education (ED). If you should need written confirmation of AskRegs information for audit or program review purposes, please contact your ED School Participation Division. NASFAA shall not be liable for technical or editorial errors or omissions contained herein; nor for incidental or consequential damages resulting from the furnishing, performance, or use of this material.