When Implementing the R2T4 Waiver and Re-Disbursing Aid, How Do We Handle Post-Withdrawal Disbursements?

This AskRegs Knowledgebase Q&A was updated on February 1, 2023 to note that the COVID-19 national emergency will end on May 11, 2023.

Scenario: The student withdrew from the payment period that includes March 13, 2020. The school already performed the return of Title IV funds (R2T4) calculation and returned both the school's share and the student's share of unearned Title IV aid from the R2T4 calculation. The R2T4 calculation had both aid that was already disbursed and aid that could have been disbursed. Under the May 15, 2020 Electronic Announcement, the school implements the R2T4 waiver (defined below) to not return unearned Title IV aid to ED or to restore unearned aid that was already returned to ED.

Answer: According to guidance NASFAA has confirmed with the U.S. Department of Education (ED), the school must (not should):

1. Re-disburse to the student all Title IV funds for which the student was eligible at the time of withdrawal and that were previously returned as unearned aid for the applicable payment period or period of enrollment, ignoring late disbursement and post-withdrawal disbursement rules in 34 CFR 668.164(j) or 668.22. In other words, you re-disburse the aid as if the R2T4 calculation never happened. Note the ineligible disbursements below.
2. Disburse all “aid that could have been disbursed” from the original R2T4 calculation for which the student was eligible at the time of withdrawal, ignoring late disbursement and post-withdrawal disbursement rules. This includes disbursing the student's second Direct Loan disbursement that could not have been disbursed previously under late disbursement rules. Note the ineligible disbursements below.
3. Make required adjustments in the Common Origination and Disbursement (COD) System. Contact COD if you have questions on how to do this.
4. Credit the student's ledger account with all aid.
5. Request any necessary funds from G5.

According to ED, the CARES Act allows the student to keep all Title IV aid for which the student was eligible at the time of withdrawal despite the late and post-withdrawal disbursement regulations. Also, it is NASFAA's understanding that you cannot re-disburse some aid without disbursing the aid that could have been disbursed previously.

Ineligible Disbursements: According to later guidance NASFAA received from ED, even if the student qualifies for the R2T4 waiver, Title IV aid cannot be re-disbursed or disbursed in the following circumstances:

• The student had an unresolved C-code at the time of withdrawal;
• The first-time undergraduate Direct Loan borrower withdrew before the 30-day delay period under 685.303(b)(5) expired;
• The Direct Loan borrower dropped below half-time before the disbursement was made;
• The Direct Loan master promissory note (MPN) was not signed prior to withdrawal;
• For nonstandard term credit-hour programs where the terms are not substantially equal in length, credit-hour nonterm programs, and clock-hour programs, a second disbursement of Direct Loan funds when the student has not successfully completed half of the number of credit hours or clock hours and half of the number of weeks of instructional time in the payment period under 685.303(d)(3)(ii)(B);
• For clock-hour or credit-hour nonterm programs, a disbursement of a Federal Pell Grant, Iraq and Afghanistan Service Grant (IASG), TEACH Grant, or for a subsequent payment period when the student has not completed the earlier payment period for which the student has already been paid [690.75(a)(5) and 686.31(a)(5)];
• For a Pell Grant, IASG, or TEACH Grant disbursement, the institution did not have a valid SAR/ISIR by the deadline established by ED annually in the Federal Register (even though this admittedly is a late disbursement rule); or
• Any other circumstances when the student was ineligible for the aid at the time of withdrawal.

Verification is complicated. Generally, if the student does not complete verification, then the student would not have been eligible for need-based aid during the payment period, and the school should not make disbursements of need-based aid for that period even if the student would otherwise qualify for the R2T4 waiver. The institution should treat the student as eligible only for non-need-based aid, and should make any disbursements of that aid for which the student was eligible prior to withdrawal. On the other hand, if the student later successfully completes verification, and following verification, the student is eligible for need-based aid, the institution should make any disbursements for which the student should have been eligible in the payment period.

Do not reverse or redo the original R2T4 calculation. The school does need to track the amount of unearned aid from the original R2T4 calculation in order to complete the required R2T4 reporting under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). See AskRegs Q&A, What Are the R2T4 Reporting Requirements Under the CARES Act?

See AskRegs Q&A, How Do We Implement the R2T4 Waiver If We Are Performing the First R2T4 Calculation For the Student?, for guidance in cases when the student has withdrawn, but the school had not already performed the R2T4 calculation or returned Title IV aid for the covered payment period. The rules are different.

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. For example, for a payment period that includes March 13, 2020, the waiver applies even to students who withdrew in January or before the disruption in campus operations due to COVID-19.

Covered period refers to the fact that the May 15th 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.

August 21, 2020 Electronic Announcement Update: "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."

Notes: 

• This AskRegs Q&A was previously updated on August 26 to include clarification from the August 21, 2020 Electronic Announcement for nonterm and nonstandard term programs that use the period of enrollment (rather than the payment period) in their R2T4 calculations. It also reminds schools of the periods covered by the R2T4 waiver.
• This AskRegs Q&A was previously updated on June 29, 2020 to clarify that, even under the R2T4 waiver, the school cannot disburse Title IV aid for which the student was not eligible at the time of withdrawal or disbursement.
• This AskRegs Q&A was previously updated on June 17, 2020 to point out that on June 16, 2020, ED made changes to the May 15, 2020 Electronic Announcement, which now expands the terms and nonterm payment periods to which the R2T4 waiver applies, as well as clarifies that the determination of COVID-19 related withdrawals are made on a payment period or period of enrollment basis.