Return of Title IV Funds (R2T4) Policy

Overview and General Requirements

The federal Higher Education (HEA) of 1965 was amended in 1998 and new regulations were established with regard to Title IV student financial aid programs. Students earn their Title IV federal financial aid by attending class and if they were not enrolled long enough to earn all their aid, the ‘unearned’ portion must be returned to the appropriate Title IV program.

Title IV funds are awarded and disbursed based on the assumption that a student will attend courses for the entire term (summer, fall or spring) and is therefore eligible for the entire amount of the disbursement for that payment period or period of enrollment. A student who withdraws from all courses and received Title IV funds must have a R2T4 calculation performed to determine the percentage of aid that was actually earned based on the amount of time the student was enrolled. Students are entitled to aid that was earned. Mt. SAC will return any unearned aid to appropriate Title IV program. This adjustment and process is most often referred to as performing the return of Title IV funds or simply "R2T4".

R2T4 regulations are complex and any person assigned to monitor and perform the R2T4 process is expected to understand and accurately interpret the R2T4 principles and regulations. The most comprehensive guide to the R2T4 regulations can be found in the Federal Student Aid Handbook Volume 5/Chapter 1 on the  Information for Financial Aid Professionals (IFAP) | or at the U.S. Government Print Office (GPO) Electronic Code of Federal Regulations website Code 34 CFR 668.22.

Financial aid programs subject to the R2T4 requirements include:

  • Pell Grant
  • Academic Competiveness Grant (not applicable at Mt. SAC)
  • National SMART Grant (not applicable at Mt. SAC)
  • TEACH Grant (not applicable at Mt. SAC)
  • Direct Unsubsidized Stafford Loan
  • Direct Subsidized Stafford Loan
  • Perkins Loan (not applicable at Mt. SAC)
  • Direct Parent PLUS Loan
  • Direct Grad PLUS Loan (not applicable at Mt. SAC)
An R2T4 calculation is not required in the following situations:
  • The student never actually began attendance for the payment period
  • The student continues to attend at least one course
  • The student began attendance but was not eligible to receive Title IV funds (SAP Denials, Verification Incomplete, Ineligible Program of Study, etc.)

Determining Withdrawal Date

Official and unofficial withdrawal dates will be determined using the federal regulation definition for a withdrawal date. The official date will be determined by the following:
  1. Date the student begins the withdrawal process;
  2. Date the student provides official notification of intent to withdraw;
  3. Students who fail to officially withdraw are assumed to have completed at least 50% of the term unless an earlier or later date is determined by the school.

Official Withdrawals

An official withdrawal is the federal term used when a student begins the official withdrawal process or provides official notification to the school of his/her intent to withdraw. The date the institution would use for R2T4 purposes would be the date the student either began the official withdrawal process or the date of the student’s official notification.

Unofficial Withdrawals

A student is considered to be an unofficial withdrawal in the event they received all ‘F’ Grades at the end of the term. Mt. SAC will calculate the percentage of financial aid earned based off of the Department of Education standard of 50%. In these events, the Office of Financial Aid will also work with Admissions & Records to confirm if the ‘F’ Grades were earned and will not treat them as an unofficial withdrawal.

Processing R2T4 for Official Withdrawals

Students receiving federal financial aid who completely withdraw within the first 60% in a payment period are subject to the federal return provisions.

Mt. SAC will use a formula to determine the amount of TITLE IV funds a student has earned as of his/her last day of attendance. During the first 60% of the payment period, the student "earns" Title IV aid in proportion to the length of time he/she remains enrolled. The percentage of TITLE IV funds earned will equal the percentage of the calendar days completed in the payment period prior to the withdrawal date or the last day of attendance. After the student has completed 60% of the payment period, he/she has earned 100% of the TITLE IV funds disbursed.

Percentage Earned – The percentage of Title IV funds earned is equal to the percentage of the payment period completed as of the last day of attendance.

Percentage Unearned – The total Title IV funds disbursed minus the amount of Title IV funds earned determine the amount of Title IV unearned and must be returned to the Department of Education.

Step 1 - Determine the student’s withdrawal date:
  • Official date of withdrawal is recorded in the SFAWDRL screen of Banner system
  • Official date of withdrawal is reported to Clearinghouse
Step 2 - Calculate R2T4 and determine the following:
  • Percentage of Title IV funds earned
  • Amount of Title IV funds earned
  • Amount of Title IV funds unearned
  • The amount the school and student share of the unearned aid (need to return)
Step 3 - Revise Title IV awards:
  • The FA Specialist revises the Title IV awards to reflect the earned amounts in RPAAWRD screen
Step 4 - Determine Unearned Aid and Disbursed Aid:
  • Determine the amount of unearned aid by subtracting earned aid from disbursed amount
  • If unearned funds must be returned, allocate unearned aid to programs from which was funded
  • Determine the institution’s share and any funds repaid by the student or refer to the Dept of ED

Returning of Title IV Funds

  • The student will be notified in writing following the official calculation of R2T4
  • The FA Office in combination with Fiscal Services will return unearned Title IV according to guideline
  • Fiscal Services will return all required Title IV funds to the Department of Education within 45 days of officially determining the student withdrew
  • The student must return any overpayment directly to Fiscal Services (1st Floor of Building 4)
  • The FA Office may refer the overpayment to the Department of ED if the student fails to make satisfactory payment arrangement in a timely manner with Fiscal Services

Post-Withdrawal Disbursements

If a student ceased enrollment prior to Title IV funds being disbursed, and if Title IV funds could have been disbursed, the designated Financial Aid staff member working with R2T4 will determine the amount of aid that was earned and perform a Post-withdrawal disbursement. If a student began attendance but was not eligible for Title IV aid prior to withdrawing, these regulations do not apply. See the FSA Student Handbook Volume 5 for further discussion on Post-withdrawal disbursements.