How Do We Implement the R2T4 Waiver If We Are Performing the First R2T4 Calculation For the Student?

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This AskRegs Knowledgebase Q&A was updated on August 25, 2020 to include a minor 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 return of Title IV funds (R2T4) calculations.

Scenario: The student withdrew from a payment period within the covered period (defined below), and the school is implementing the return of Title IV funds (R2T4) waiver (defined below) under the May 15, 2020 Electronic Announcement. For whatever reason (e.g., waiting on ED guidance, unofficial withdrawals after reviewing all "F" grades at the end of the term, etc.), the school has not already performed the R2T4 calculation nor returned unearned Title IV aid for the payment period. The student has both aid that was already disbursed and aid that "could have been disbursed" for the payment period. The school has determined the student withdrew due to COVID-19.

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

  1. Disburse all remaining Title IV disbursements for which the student was eligible prior to withdrawing from the payment period or period of enrollment (see below), including any second or subsequent Direct Loan disbursements. Ignore all late disbursement and post-withdrawal disbursement rules in 34 CFR 668.164(j) and 668.22, respectively. Note the ineligible disbursements below.
  2. Perform the R2T4 calculation and include all Title IV aid for which the student was eligible prior to withdrawing as “disbursed aid” when you do the calculation, again ignoring all late and post-withdrawal disbursement rules. Note the ineligible disbursements below.
  3. Except for new disbursements, the school makes no adjustments to COD as a result of the withdrawal.
  4. Except for new disbursements, the school makes no adjustments (as the result of the withdrawal) to the amount of Title IV aid credited to the student’s ledger account.
When performing the R2T4 calculation, the school now includes all Title IV aid for which the student was eligible during the payment period prior to withdrawing. All Title IV aid will be considered “disbursed aid” even if it was “aid that could have been disbursed” under normal rules. According to ED, the CARES Act allows the student to keep all Title IV aid 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 disbursed (or re-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 re-do the original R2T4 calculation. The school does need to track the amount of unearned aid from this 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?
When the school later reports that the student was a COVID-related withdrawal:
Same Rules Apply: Be sure to remember that the same rules apply to all unofficial withdrawals, whether they were determined using all “F” grades or in all other instances when the student unofficially withdrew. Also, the same rules apply to nonterm and nonstandard term programs that choose to use the period of enrollment instead of the payment period in the R2T4 calculation. Standard term programs do not have this choice and must use the standard term payment period (semester, trimester, quarter) in the R2T4 calculation.
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."
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 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.
If the student withdrew for other reasons not related to COVID-19, the above guidance does not apply. The school performs the R2T4 calculation under normal R2T4 rules under 668.22 that are unrelated to COVID-19. The student does not qualify for the COVID-related withdrawal benefits, such as Direct Loan disbursement cancellation or restoration of Pell Grant Lifetime Eligibility Used (LEU).
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.