Who is Responsible For the Overaward Created When a Student Completes the Clock-Hour Program Early and Graduates?

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This AskRegs Q&A has been updated to reflect guidance published by the U.S. Department of Education (ED) on the Program Integrity Questions and Answers—Return of Title IV Funds website on August 20, 2021 for implementation of the September 2, 2020 Final Rules on return of Title IV funds (R2T4) and modules. Refer to CHP-Q1/A14  on the Program Integrity Questions and Answers website.

The following guidance applies only to the return of Title IV funds (R2T4) rules that are effective July 1, 2021 (with possible early implementation by the school), in accordance with the September 2, 2020 Federal Register.

According to guidance published on ED Program Integrity Questions and Answers website, the school is responsible.

Under the R2T4 regulations effective July 1, 2021, if the student completes all the requirements for graduation before completing all of the clock-hours or days in the payment period or period of enrollment, the student is not considered to have withdrawn and is exempt from the R2T4 calculation.

However, if a clock-hour student graduates without successfully completing all of the established clock hours in the program, the school must re-prorate the amount of Title IV aid and only pay the student for the clock hours the student successfully completed. This retroactive proration of the student’s aid often creates an overaward/overpayment. In this situation, the school is ultimately responsible for returning the Title IV aid since students in these circumstances are treated as if they were always enrolled in a shorter program.

See the following excerpt from CHP-Q1/A1 on  the ED Program Integrity Questions and Answers website (bold added):

"Our State permits students to graduate prior to completing all of the clock hours normally established in a program if the students can demonstrate that they have mastered all the skills in the program. One of our students has graduated from a 900-hour clock hour program before successfully completing all of the clock hours in the program that is established in our institution’s Eligibility and Certification Approval Report (ECAR). The student graduated having successfully completed only 750 clock hours. Given to the changes to the regulations effective July 1, 2021, is this student exempt from the R2T4 requirements?

Yes. Although the student did not successfully complete all the clock hours in the program, they are not treated as a withdrawal and the institution is not required to perform an R2T4 calculation because the student graduated from the program.

However, allowing a student to graduate before successfully completing the hours in the program could still require the institution to return Title IV funds for the student. A student’s eligibility for Title IV aid in a clock-hour program is based, in part, on the overall number of clock hours in the student’s program of study. When an institution allows a student to graduate from a clock hour program without completing all of the established hours in the program, the institution has effectively shortened the program’s length – resulting in reduced Title IV eligibility – for the student. Therefore, if a student graduates from a clock hour program without successfully completing all of the established clock hours in the program, the institution must recalculate the student’s eligibility for all Title IV aid in the program and must perform a new proration of the student’s Pell Grants and Direct Loans as if the student had been enrolled in a program with fewer clock hours.

Then, if the institution had disbursed Title IV aid in an amount greater than the amount that it recalculates, the institution must return the difference between the recalculated amount of Title IV for which the student was eligible based on enrollment in the shorter program and the amount that was disbursed. The institution, not the student, is ultimately responsible for returning the Title IV aid in these situations."

Note: The re-proration adjustment applies only to clock-hour programs when the student completes the hours early (not the weeks). It does not apply to credit-hour programs.
 
See the clock-hour program category of the ED Program Integrity Questions and Answers  - Return of Title IV Funds website.

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