The Higher Education Amendments of 1998 (HEA98) govern the Return of Title IV federal student aid funds when a student withdraws from the college. The policy applies to federal grant and loan programs (Pell, SEOG, Federal Direct Stafford Loans, Federal Direct PLUS Loans), but excludes the Federal Work Study program.
In general, the law assumes that a student "earns" approved (verified) federal student aid awards in proportion to the number of days in the term prior to the student's complete withdrawal. If a student completely withdraws from all courses during a term, the school must calculate, according to a specific formula, the portion of the total scheduled financial assistance the student has earned and is entitled to retain. If a student receives (or the college receives on the student's behalf) more assistance than (s)he earns, the unearned funds must be returned to the U. S. Department of Education (DOE). If a student's charges are less than the amount earned, and a credit balance remains, the student may be able to receive a refund of those funds. Students who have not completed the verification process are ineligible to receive any federal student aid.
The portion of the federal grants and loans that the student is entitled to receive is calculated on a percentage basis by comparing the total number of days that the student completed before (s)he withdrew. For example, if a student completes 30% of the semester, (s)he earns 30% of the approved federal aid that (s)he was originally schedule to receive for the term. This means that 70% of the student's scheduled or disbursed aid remains unearned and must be returned to the federal programs. The policy governs the earned and unearned portion of the student's federal Title IV aid only. This policy does not affect the student's charges; the college's refund policy will be used to determine the reduction, if any, of the student's tuition and fees. The student is responsible for paying any outstanding charges to the college.
The student's official withdrawal date will be determined by the college as (1) the date the student began the official withdrawal process (date student notified the college of his/her intent to withdraw); (2) the midpoint of the semester if the student withdraws without notifying the college; or (3) the student's last date of attendance at an academically-related activity as documented by the college.
Once a student completes more than 60% of the semester, a student has earned 100% of the Title IV funds awarded. Earning 100% does not mean the student is necessarily entitled to receive a late (or post-withdrawal) disbursement of funds that have not yet been received by the college.
If it is determined that a portion of the financial aid received on the student's behalf is unearned, the college shares the responsibility of returning those funds in accordance with the Return of Title IV Funds regulations.
Any grant funds that the student is required to return to the federal programs are considered an over payment. The student must either repay the amount in full, or make satisfactory payment arrangements with the DOE to repay the amount. If the student fails to repay, or make payment arrangements in this situation, (s)he will lose eligibility to receive future federal financial aid at any institution.