On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748). Section 3508 of the Act addresses the requirements for return of Title IV funds (R2T4) when a federal aid recipient withdraws from a term or payment period as a result of an event related to the Coronavirus. This alert summarizes those provisions and related guidance provided by the U.S. Department of Education (ED).

CARES Act Waivers

R2T4 Waivers. Effective immediately the statutory requirement that an institution return unearned Title IV funds (both grants and loans) is waived when a federal student aid recipient withdraws from the institution during a term or payment period due to the national COVID-19 emergency. The requirement that a student return unearned Pell Grant and other grant assistance is also waived.

While these waivers provide welcome financial relief to students and institutions, the CARES Act does not relieve institutions of the administrative burden of performing R2T4 calculations in accordance with federally defined timelines. An institution that uses the waiver must still document its calculations by reporting the number of students affected, the amount of grant and/or loan aid each received, and the amount of unearned assistance that was not returned by the institution. The waiver is not applicable to R2T4 calculations performed prior to the declaration of the COVID-19 emergency.

Cancellation of Loan Obligation. If a student who borrowed a Federal Direct Loan withdraws as a result of events related to COVID-19, the entire portion of the loan associated with the payment period will be cancelled. The U.S. Department of Education will provide further guidance on the loan cancellation process.

Approved Leave of Absence. The CARES Act allows an institution more flexibility to permit a student to take an approved leave of absence (as federally defined), rather than withdraw, and return from the leave within the same term (or equivalent) to complete the coursework.

Earlier Guidance from ED

Prior to the March 27 enactment of the CARES Act, ED provided guidance for interruptions of study related to the Coronavirus emergency on March 5. This was updated with Frequently Asked Questions (FAQs) on March 20.

This guidance addresses the procedures for completing R2T4 calculations when an institution temporarily interrupts or ceases operations as a result of the COVID-19 emergency. If any of the following occur, a federal aid recipient must be treated as having withdrawn and a R2T4 calculation performed:

  • an institution ceases operation and does not reopen before the end of the respective payment period
  • an institution ceases operation and reopens before the end of the respective payment period, but a student that began attendance does not return
  • an institution does not cease operation, and a student stops attending having not completed the days scheduled to complete the term (i.e., withdraws)

ED's guidance describes what to use as the withdrawal date, date of determination, and how to count the days in the payment period (excluding closures and scheduled breaks that are five or more consecutive days) in the R2T4 calculation. A more detailed explanation of how to count number of days in the payment period is provided in the FAQs.

More to Come

ED is expected to issue new guidance soon to clarify provisions of the CARES Act. Updated guidance issued by ED on April 3 covered some of the areas impacted by the CARES Act but not the R2T4 provisions.

ED has established a page on its website to provide information to educational institutions, which currently includes this guidance and a document from the Centers for Disease Control specific to higher education. Most recently, a Q&A for students, parents, and borrowers was added on April 1 that schools may want to bring to the attention of their students.