Yes. A student can withdraw due to COVID-19 and have the Direct Loan disbursement cancelled under the CARES Act withdrawal benefits. NASFAA has confirmed with the U.S. Department of Education (ED) that the student can then later borrow the cancelled disbursement amount again during the same academic year for which the loan is originated. In other words, the cancelled disbursement restores the annual loan limit for future borrowing during the same academic year. The amount of the cancelled disbursement is also restored to the student's aggregate loan limit so it can be borrowed again in the future.
Under the CARES Act withdrawal benefits, if the student withdraws from a payment period or period of enrollment as a result of COVID-19, ED will cancel the entire amount of any disbursement of a Direct Loan borrowed by the student or his or her parent for the payment period or period of enrollment, thereby restoring eligibility for that disbursement amount.
It is possible for a student to withdraw due to COVID-19 during one term/payment period and then withdraw again due to COVID-19 during another term/payment period within the covered period (see below). When this happens, the student can receive the withdrawal benefits for both terms/payment periods. According to ED, it is the school's decision as to whether it will accept a student's assertion that his, her, or their withdrawal was due to COVID-19. If the school finds a student repeating such behavior, "there is a reasonable person threshold beyond which a school might ask for more robust documentation."
Example: The school treats summer 2020 as a header to the 2020-21 academic year. A student withdrew for reasons related to COVID-19 in the summer, and the school applied the R2T4 waiver by marking the Coronavirus Indicator in COD to indicate the Direct Loan disbursement for the summer loan should be cancelled. The student withdraws again in fall 2020 for COVID-19-related reasons.
According to ED, this is permissible. The student would be able to withdraw in summer, have the summer loan disbursement cancelled, and then return and borrow the full annual loan limit for fall-spring. Then, if the student withdraws due to COVID-19 again during the fall term, the fall disbursement would be cancelled, and the student could borrow the full annual loan limit during the spring 2021 term.
Once the school has determined that a loan disbursement will be cancelled due to CARES Act relief, it may exclude that loan disbursement from the student’s annual loan limit. The school does not need to wait for the NSLDS to be updated. The school may rely on its own records to determine that the loan disbursement will be cancelled. COD has been updated to prevent Direct Loan disbursements with the Coronavirus Indicator from counting toward a student’s annual loan limit and triggering edits that could result in the disbursement being rejected.
If this student were a transfer student, the school to which the student is transferring (School B) may check NSLDS. If the loan has not yet been updated in NSLDS, School B may use COD to determine whether the disbursement has been tagged with the Coronavirus Indicator by School A. To do so, the school must search for the student by Social Security Number (SSN), or have a relationship with the student (e.g., the student has used the school’s Federal School Code on the FAFSA). If so, then School B can view the award and disbursement information for the student, and the Disbursement History Pages will show the Coronavirus Indicator. If the disbursement has been tagged with the Coronavirus Indicator, it will not count toward the student’s annual loan limit. It is important to note that if a school does not know the student's SSN, or have a relationship with the student as authorized by the student on the FAFSA, the school would not be able to see this information.
See also AskRegs Knowledgebase Q&A, Can a Student Receive the CARES Act Withdrawal Benefits More Than Once?
Covered Period: 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. This is what we are calling the "covered period." In other words the covered period includes multiple payment periods or periods of enrollment. See AskRegs Knowledgebase Q&A, How Do We Determine If a Withdrawal Was the Result Of a Qualifying Emergency Due To Coronavirus?
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