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ED Issues Interim Final Regulations for Student Aid Programs

August 18, 2006

Due to the tight time frame for implementing a number of statutory changes to the Title IV student aid programs, the Department of Education recently issued interim final regulations that take effect September 8. A series of Dear Colleague letters issued this spring alerted colleges and universities to the upcoming changes mandated by the Higher Education Reconciliation Act of 2005.

Of primary interest to business officers are changes to the rules governing the return of Title IV funds (R2T4) when students withdraw.

  • R2T4 rules no longer apply to funds under the GEAR UP, Student Support Services, or Leveraging Educational Assistance programs.
  • The institution is now required to contact a borrower before making a late or post-withdrawal disbursement of Title IV loan funds. The borrower has 14 days to confirm the disbursement unless the institution chooses to extend the deadline. In the past, institutions only needed confirmation if funds were being disbursed directly to the borrower but not to make a late disbursement to cover charges on a student's account. Note that the borrower cannot opt to receive funds as a direct disbursement that the institution wants to credit to the student's account, unless the institution agrees. This change may diminish outstanding student loan debt for students who withdraw, but NACUBO is concerned that it will increase unpaid charges owed to institutions.
  • Students will need to repay less grant money under the new rules. Instead of subtracting 50 percent of the amount the student was overpaid, under the new formula, 50 percent of the original grant amount will be subtracted from the amount the student owes. There is also a new de minimis amount, so students will not have to repay amounts of $50 or less.
  • The order in which funds are to be returned to Title IV programs is changed to incorporate the new Academic Competitiveness Grant program and the SMART Grant program.
  • An institution will now have 45 days, rather than 30, from the date it determines that a student withdrew to return unearned funds.

Other topics addressed in the regulations include distance education, new military deferments for student loan borrowers, new loan limits, and the school-as-lender program. ED will accept comments on the interim final regulations until September 8.

NACUBO Contact:  Anne Gross, vice president, regulatory affairs, 202.861.2544.