Treatment of Title IV Aid When a Student Withdraws
The law specifies how a school must determine the amount of Title IV program assistance that you earn if you withdraw from school. The Title IV programs that are covered by this law are: Federal Pell Grants, Iraq and Afghanistan Service Grants, Academic Competitiveness Grants, National SMART grants, TEACH Grants, Stafford Loans, PLUS Loans, Federal Supplemental Educational Opportunity Grants (FSEOGs) and Federal Perkins Loans.
When you withdraw during your payment period (example: fall semester or spring semester), the amount of Title IV program assistance that you have earned up to that point is determined by a specific formula. If you received (or AU or parent received on your behalf) less assistance than the amount that you earned, you may be able to receive those additional funds. If you received more assistance than you earned, the excess funds must be returned by AU and/or you.
The amount of assistance that you have earned is determined on a prorata basis. For example, if you completed 30% of your payment period, you earn 30% of the assistance you were originally scheduled to receive. Once you have completed more than 60% of the payment, you earn all the assistance that you were scheduled to receive for that period.
If you did not receive all of the funds that you earned, you may be due a Post-withdrawal disbursement. If your Post-withdrawal disbursement includes loan funds, AU must get your permission before it can disburse them. You may choose to decline some or all of the loan funds so that you don’t incur additional debt. AU may automatically use all or a portion of your Post-withdrawal disbursement of grant funds for tuition, fees and room and board charges (as contracted with the school). AU needs your permission to use the Post-withdrawal grant disbursement for all other school charges. If you do not give your permission, you will be offered the funds. However, it may be in your best interest to allow AU to keep the funds to reduce your debt at AU.
There are some Title IV funds that you were scheduled to receive that cannot be disbursed to you once you withdraw because of other eligibility requirements. For example, if you are a first-time, first-year undergraduate student and you have not completed the first 30 days of your program before you withdraw, you will not receive any Direct Loan funds that you would have received had you remained enrolled past the 30th day.
If you receive (or AU or your parent receive on your behalf) excess Title IV program funds that must be returned, your school must return a portion of the excess equal to the lesser of:
- your institutional charges multiplied by the unearned percentage of your funds, or
- the entire amount of excess funds
The school must return this amount even if it didn’t keep this amount of your Title IV program funds.
A school must return Title IV funds to the programs from which the student received aid during the payment period or period of enrollment as applicable, in the following order, up to the net amount disbursed from each source:
- Unsubsidized Direct Stafford loans (other than PLUS loans)
- Subsidized Direct Stafford loans
- Federal Perkins loans
- Direct PLUS loans
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
- Federal TEACH Grants
- Iraq and Afghanistan Service Grant
If AU is not required to return all of the excess funds, you must return the remaining amount. Any loan funds that you must return, you (or your parent for a PLUS Loan) repay in accordance with the terms of the promissory note. That is, you make scheduled payments to the holder of the loan over a period of time.
Any amount of unearned grant funds that you must return is called an overpayment. The maximum amount of a grant overpayment that you must repay is half of the grant funds you received or were scheduled to receive. You do not have to repay a grant overpayment if the original amount of the overpayment is $50 or less. You must make arrangements with AU or the Department of Education to return the unearned grant funds.
The requirements for Title IV program funds when you withdraw are separate from any refund policy that AU may have. Therefore, you may still owe funds to AU to cover unpaid institutional charges. AU may also charge you for any Title IV program funds that the school was required to return. If you don’t already know what AU’s refund policy is, you can review this online at www.american.edu/finance/studentaccounts. For additional information about how to officially withdraw from AU, please contact AU Central at 202-885-8000 or firstname.lastname@example.org.
If you have questions about your Title IV program funds, you can call the Federal Student Aid Information Center at 1-800-4-FEDAID (1-800-433-3243). TTY users may call 1-800-730-8913. Information is also available on Student Aid on the Web at www.studentaid.ed.gov.