R2T4: what the Return of Title IV Funds calculation means for a school

What is R2T4?

R2T4 stands for Return of Title IV Funds. It is set out in 34 CFR 668.22. When a student who received Title IV grant or loan aid withdraws during a payment period or period of enrollment, the school must work out how much of that aid the student earned as of the withdrawal date. The rest is unearned and goes back.

The aid in scope is Direct Loans, Pell Grants, Iraq and Afghanistan Service Grants, TEACH Grants and FSEOG (668.22(a)(3)). Federal Work-Study is not part of it.

How much aid has the student earned?

Up to the 60% point, the student earns the same percentage of aid as the share of the period completed. After the 60% point, the student has earned 100% (668.22(e)(2)).

• Credit-hour programs count calendar days completed against the calendar days in the period. Scheduled breaks of five or more consecutive days are left out (668.22(f)(1)(i) and (f)(2)).
• Clock-hour programs count the clock hours the student was scheduled to complete by the withdrawal date, against the clock hours in the period (668.22(f)(1)(ii)). It uses the schedule, not the hours actually attended.

Who returns the unearned aid?

The school goes first. It returns the lesser of two amounts (668.22(g)(1)):

1. the total unearned aid, or
2. the student's institutional charges for the period multiplied by the unearned percentage.

The student is responsible for anything left. Loan amounts are repaid under the loan's terms. For grants, the student doesn't have to repay the part of an overpayment equal to 50% or less of the grant aid for the period. After that, a grant overpayment of $50 or less isn't owed either (668.22(h)(3)).

Money goes back in a set order: unsubsidized Direct Loans, subsidized Direct Loans, Direct PLUS, then Pell Grants and the other grants (668.22(i)).

A worked example

This is an illustration with made-up figures, not a real case.

Here the school returns all $1,200 and the student owes nothing back to the Pell program.

What are the deadlines?

• Withdrawal date. A school that is required to take attendance uses the last date of attendance from its records, and must document it within 14 days of that date (668.22(b)).
• Returning funds. The school returns its share as soon as possible, and no later than 45 days after it determines the student withdrew (668.22(j)(1)).
• Grant overpayment notice. Within 30 days of that determination, the school must notify a student who owes a grant overpayment (668.22(h)(4)(ii)).

How does R2T4 relate to your refund policy?

They are separate. The FSA Handbook says the R2T4 rules don't dictate a school's refund policy. A school, state or agency refund policy decides what the student owes after withdrawing. It does not change how much aid the student earned. The charges used in the calculation are the ones assessed before the withdrawal, even if the refund policy later reduces them.

So returning aid can leave the student owing the school. That balance, and how a payment plan changes to match it, is covered in A student withdraws mid-program.

General information, not legal or compliance advice.