Withdrawing from Classes and Returning of Federal Funds

Return of Federal Funds (Pell grant, Supplemental Educational Opportunity Grant, Academic Competitiveness Grant, Stafford loan, PLUS loan, not including Federal Work-study funds): 

Officially withdrawing from all of your classes or unofficially withdrawing from your classes (i.e. stop attending your classes) before the 60% point of each semester will impact your federal assistance!  Federal law may require you to pay back all or a portion of your federal financial aid withdrawing before that date.  Example:  For Fall 2006 the 60% date is 11/01/2006.  Bob has a Pell grant for $550 for the fall.  He withdraws from all classes prior to the 60% date.  He will owe $150 back to the Pell grant due withdrawing.   If he withdraws after the 60% date he will owe nothing to the federal programs.

Please note:  60% dates for 2007-08:  Fall 2007 is 10/28/07; Spring 2008 is 4/2/08.

Calculation of Title IV financial assistance earned: The college must first determine the percentage of assistance earned by the student at the point in time when she/he withdraws completely. Up through the 60 percent point in time in the term, the percentage of assistance earned is equal to the percentage of the term completed as of the day the student withdraws. If the withdrawal occurs after the 60 percent point, the percentage of aid earned is 100 percent. 

Calculation of Title IV financial assistance NOT earned: The amount of assistance not earned by the student is calculated by subtracting the percentage earned (when less than 60 percent) from 100 percent. That percentage is then applied to total amount of grant and loan assistance that was disbursed for the semester.

Difference between amounts earned and amounts received: If the student has received more grant or loan assistance than the amount earned, the unearned funds must be returned to the Title IV programs by the college or the student or both.

Responsibility of the college: The college must return to the Title IV programs the lesser of the following:

• The unearned amount of Title IV assistance; or
• The institutional charges (tuition, fees, and, in some cases, books) incurred for the semester, multiplied by the unearned percentage of Title IV grant and loan assistance.

Responsibility of the student: The student returns unearned title IV assistance minus the amount the college returns. The U.S. Department of Education does not allow the college or the student any discretion regarding non-institutional costs. In most cases, when a student receives Title IV assistance greater than the amount of institutional charges, and completely withdraws from the college, he or she will have to return some of those federal funds.

Order in which federal funds must be returned:   Whether the college or the student or both must return federal funds, there is a prescribed order as to which federal program receives returned funds first, second, third, etc. That order is as follows:

 Unsubsidized Stafford Loan
 Subsidized Stafford Loan
  Federal PLUS Loan
  Pell Grant
  Academic Competitiveness Grant
  Federal SEOG Grant
  Other Title IV Programs

Example - Return of Federal Funds

John, a freshman at the college, enrolls for the fall semester and incurs institutional charges of $1260. He received a Federal Pell Grant of $1000 and a Federal Stafford Loan of $1260. He withdraws from the college after completing 37% of the semester.

1. Percent of unearned Title IV aid: 100% - 37% = 63% 

     2.   Amount of unearned Title IV Aid:

        $2260 total Title IV aid  x  63% unearned = $1424 unearned

3. Amount of aid the college must return to the Title IV programs:

The college must return the lesser of the unearned amount of title IV aid ($1424, shown above), or the semester charges incurred, multiplied by the unearned percentage (63%, shown above):

$1260 total semester charges x 63% unearned = $794 unearned

The amount of $794 is the lesser of the two calculated unearned amounts, and the college must return this amount. In accordance with the return of federal funds formula, this amount will reduce the Federal Stafford Loan John borrowed for the fall semester.

As a result of this return of funds to the Title IV programs, John will owe $794 to the college for unpaid institutional charges.

4. Amount of aid the student must return: the student must return the difference between the amount of unearned Title IV aid and the amount returned by the college:

$1424 unearned aid amount - $794 returned by the college = $630 to be returned by the student.

John will repay $466 of the required $630 to his Federal Stafford Loan lender according to the terms of his loan. The remaining $164 John must return is Federal Pell Grant funds, subject to the 50% reduction consideration given the student; therefore John will have to return $82 to the Pell Grant program