updated: April 1, 2020

Withdrawal vs. Leave of Absence and Return of Title IV Funds

As colleges and universities move quickly to devise policies to respond to the quickly evolving situation, allowing flexibility and considering different options can be helpful. One issue of concern is the impact of COVID-19 related withdrawals on students and institutions of higher education. Both Congress and the U.S. Education Department recently enacted waivers for a wide range of rules governing federal financial aid for college students. However, institutions should still consider the implications of withdrawal vs. leave of absence for the purposes of Return to Title IV funds (R2T4). The resource below includes updated waivers and guidance from the federal government, as well as potential impacts for students and institutions when considering withdrawals and leaves of absence.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act
Congress recently passed and President Trump signed into law S. 3548, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a massive $2.2 trillion stimulus package that aims to provide some economic relief to colleges and students whose semesters were upended by the coronavirus pandemic. The legislation includes provisions on institutional refunds and federal student loan flexibility that:

• suspend an institution’s obligation to return Title IV funds if a student withdraws during a payment period due to a qualifying emergency;
• suspend a student’s obligation to return Title IV aid they have received if they withdraw during a payment period due to a qualifying emergency;
• relieve borrowers of the obligation to repay loans that were taken out if they withdraw due to a qualifying emergency during the payment period for which those loans were borrowed;
• allow for institutions to allow students to take a leave of absence without needing to return in the same semester.

U.S. Education Department Guidance for Interruptions of Study Related to Coronavirus (COVID-19)
The department issued initial guidanceto provide flexibilities for institutions that are working to help students complete the term in which they are currently enrolled. However, the agency is expected to release additional guidance to reflect the changes and regulatory waivers provided under the CARES Act. AACRAO will provide updated resources as soon as they become available.

Possible Implications for R2T4 to Consider Regarding Withdrawal vs. Leave of Absence

Leave of Absence
Under current regulations and guidance, a Leave of Absence (LOA) assumes the student will return to complete their program within 180 days. LOA is only possible with certain programs, such as clock hour programs taught in cycles.

• It may be beneficial for a student to be placed on LOA, if possible, as this would eliminate or delay the need for the R2T4.
• Additionally, if a student is able to return to complete their program within 180 days, LOA status may prevent the student from initially owing money to the institution, as no funds would be returned via R2T4.
• However, the institution must keep track of the student’s anticipated return date and complete the R2T4 if the student does not return on the predetermined date, as anticipated.
• Additionally, the student may owe a bill at an inopportune time and their LOA could consume part or all of their 6 month grace period to repay their student loans if they do not return as scheduled.

Withdrawal
If it is not possible for a student to return to complete their program within 180 days, they should not be placed on LOA, from a compliance point of view.

• Under a withdrawal, the institution does not need to keep track of the student’s anticipated return date. The R2T4 is completed based on their withdrawal date and the student’s aid status is finalized for that enrollment period (term).
• If the student returns to their program, the school has the ability to reinstate institutional financial aid awards, based upon its internal policies.
• However, if the student returns within the same enrollment period (term), the R2T4 previously completed was premature but required to comply with the regulations that govern the institution’s response time to knowing the student’s last day of attendance and subsequent actions to return aid to its sources. The institution, at that point, already completed that process and must now take steps to reinstate the financial aid awards, if possible, both of which would not be required if the student had been placed on LOA.
• Additionally, after returning financial aid awards via R2T4, the student may owe a balance to the institution that was greater than any remaining balance after financial aid, prior to a R2T4 calculation.