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Department of Education Issues Third Letter on Title IV Changes

May 2, 2006

Several revisions to the statutory language governing the return of Title IV funds rules are addressed in the latest Department of Education Dear Colleague letter. The letter (GEN-06-05), the final in a series of three detailing changes to the Title IV student aid programs enacted as part of the Higher Education Reconciliation Act, covers changes to student and institutional eligibility and the Student Assistance General Provisions.

Although Congress has not completed the long-delayed reauthorization of the Higher Education Act, a number of amendments to the HEA were included in the budget reconciliation bill that was enacted in early February. Several changes were made to the return of Title IV funds, or R2T4 as the rules governing the treatment of federal student aid when students withdraw during a term have come to be known. These include:

  • easing the timely repayment requirements to allow institutions 45 days rather than 30 days to return unearned funds,
  • limiting student repayments to the amount by which the overpayment exceeds one-half of the original grant amount,
  • forgiving repayment obligations by students of $50 or less,
  • requiring institutions to contact students who have withdrawn before making a post-withdrawal disbursement of a loan, and
  • restricting applicability of the R2T4 requirements to the Pell, FSEOG, Federal Direct Loan, FFEL, and Perkins Loan programs, as well as the two new grant programs (Academic Competitiveness and SMART grants).

Other topics covered in the letter include a clarification of the restrictions on Title IV aid for students convicted of drug offenses, changes to needs analysis, and modification of the 50 percent rule relating to distance education.

The earlier Dear Colleague letters detailed changes to the loan programs (GEN-06-02) and provided an overview of the two new grant programs (GEN-06-04).

The NACUBO contact for student aid issues is Anne Gross, vice president, regulatory affairs.