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The Federal Return of Title IV funds formula (R2T4) dictates the amount of Federal Title IV aid that must be returned to the federal government by the school and/or the student.  The federal formula is applicable to an eligible student receiving federal aid when that student withdraws at any point during the payment period.  If a student did not start or begin attendance at the school, the R2T4 formula does not apply.

Official Withdrawal Process:  If a student wishes to withdraw from school, they must notify the director of the school.  The notification must be in writing.   notification is received is the date of determination.  The director must begin the withdrawal process.

Unofficial Withdrawal Process:  A student’s withdrawal date is their last date of physical attendance.   Their date of determination is 14 days after they cease attendance.  Aid received and prior to DOD is aid that could have been disbursed.  

If a student withdraws during a leave of absence, the date of determination is the date they officially withdraw.  If the student does not return from a leave of absence, their date of determination is the date they were scheduled to return.

Aid Earned vs. Unearned

Earned Title IV Funds 

Title IV funds used to cover educational costs according to the length of time the student was enrolled before withdrawing. The amount of funds earned is directly proportional to the number of clock hours scheduled to have been completed in the payment period as of the student's withdrawal date.  For our clock-hour program, the percentage of the period completed is determined by dividing the number of hours the student was scheduled to complete in the payment period  as of the day the student withdrew, by the total number of clock hours in the same period as follows: 

•   of clock hours the student was scheduled to complete in the period divided by total hours in the period.
•  If the resulting percentage is greater than 60% a student is considered to have earned all aid. 

Unearned Title IV Funds 

The amount of grant and loan assistance awarded under Title IV that has not been earned by the student and must be returned to the programs. The unearned Title IV funds percentage is determined by subtracting the earned Title IV percentage from 100. To calculate the amount of unearned Title IV funds, multiply the total disbursed federal financial aid by the unearned Title IV refund percentage. 

For the determination of and calculation of aid earned and unearned, only scheduled hours are used to determine the percentage of the period completed by a student withdrawing from a clock hour program. 

A student withdrawing from a clock hour program earns 100% of his or her aid if the student’s withdrawal date occurs after the point that he or she was scheduled to complete more than 60% of the scheduled hours in the payment period. The scheduled clock hours used for a student are those established by the school prior to the student’s beginning class date for the payment period or period of enrollment, and the hours must have been established in accordance with any requirements of the state or the institution’s accrediting agency. These hours are consistent with the published materials describing the institution’s programs.

If a student receives less Title IV funds than the amount earned, the school will offer the student a disbursement of the earned aid that was not received at the time of their withdrawal which is called a post-withdrawal disbursement.  Post-withdrawal disbursements will be made from Pell Grant funds if the student is eligible.  If there are current educational costs still due the school at the time of withdrawal, a Pell Grant post-withdrawal disbursement will be credited to the student’s account. Any remaining Pell funds must be released to the student without the student having to take any action. The funds must be released as soon as possible but no more than 45 days after the date of determination.  Any federal loan program funds due in a post-withdrawal disbursement must be offered to the student and the school must receive the student’s authorization before crediting their account.

If a credit balance still exists on the student’s account after the R2T4 and institutional refund calculations are done, that credit balance must be used to pay any grant overpayment that exists based on the current withdrawal within 14 days from the date that the R2T4 calculation was performed.  The overpayment must be eliminated prior to offering a credit balance to a student.  Returns must be made as soon as possible to the federal programs but no later than 45 days after the date of determination.  

The law requires that a student is responsible for all unearned Title IV program assistance that the school is not required to return.  This is determined by subtracting the amount returned by the school from the total amount of unearned Title IV funds to be returned.

If a student owes an overpayment to the U.S. Department of Education, Image Maker Beauty Institute will notify the student in writing within 30 days from the date of the school’s determination that student withdrew.

Example:  Student withdraws having received $2865 in Pell grant, $1742 subsidized direct loan and $2969 of unsubsidized direct loan for a total $7576.  The student completed 240 scheduled hours as of their last day of attendance from 450 scheduled hours in the payment period.  They would have earned 53.3% of their federal aid received.  $7576 x 53.3% = $4038.01.  The unearned aid is calculated using the difference of 100% and the 53.5% which is 46.7%.  The prorated tuition and fee costs for the 450 hour payment period are $7800.  $7800 x 46.7 = $3642.60.  The school is obligated to return to the federal aid programs the lesser of the two which is the $3642.60.  The difference between the earned and unearned is the responsibility of the student.  If there is still a balance of loans to be paid the student repays it through the normal repayment process.  If it is a grant overpayment the student is responsible for any amount over 50% of their initial grant. 

Students who owe overpayments to the U.S. Department of Education, as a result of a complete withdrawal, will initially retain their eligibility for Title IV funds for a maximum of 45 days from the earlier of the:

• Date the school sends the student notice of the overpayment, or 
• Date the school was required to notify the student of the overpayment.

There are two positive actions a student can take to extend his or her eligibility for Title IV funds beyond 45 days.
1. The student may repay the overpayment in full to the school. 
2. The student may sign a repayment agreement with the Department of Education.

If the student takes no positive action during the 45-day period, Image Maker will report the overpayment to the National Student Loan Database System (NSLDS) and Borrower Services immediately after the 45-day period has elapsed.

The following Title IV distribution order is used for all SFA students.
Unsubsidized Direct Loan
Subsidized Direct Loan
Direct PLUS Loan (Parent)
Federal PELL Grant 
Iraq Afghanistan Service Grant

This Policy is in addition to the Institutional Refund Policy.

For the love of money
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