Returning Federal Funds
If financial aid is received (other than College Work-Study) and the student terminates enrollment on or before 60% of the semester has elapsed, federal financial aid (Federal Direct loans, Perkins loans, and Federal Pell and SEOG grants) must be returned according to the following schedule.
The school is responsible for returning any portion of the student's unearned aid that was applied toward the student's tuition and fees. This may create a bill for the student for any tuition and fees still owed after returning the necessary federal aid. The student is responsible for repaying any unearned federal aid the student received as a cash exchange check.
Kerry withdraws from Naropa on the 15th day of classes of the fall semester, which consists of 103 days total. Hence, Kerry completed 15 days/103 total days = 15% of the semester. Therefore, Kerry earned 15% of the federal aid awarded. If Kerry received $4,000 in federal aid, then the amount of earned aid is $4,000 x 15% = $600. Since $600 is earned aid, the remainder ($4,000 - $600) of $3,400 must be returned. Assume that institutional charges (tuition and fees) totaled $3,600 for the semester. The school is responsible for returning the lesser of:
- The unearned Title IV disbursements ($3,400), or
- The unearned percentage times institutional charges (85% x $3,600=$3,060)
In this case, the school returns $3,060 and the student returns $340 to the Federal Aid Programs. At Naropa, if the student withdraws any time from the 8th through the 15th day of classes, they are entitled to an 80% reduction in tuition ($3,600 x 80%), so tuition would be reduced to $720 ($3,600 x 20%). Since Naropa originally applied $3,600 of the student's Federal aid to the tuition, and then returned $3,060 to the federal aid programs, Naropa now has only $540 applied to Kerry's tuition. This means that Kerry owes Naropa $180 ($720 - $540) towards tuition. If Kerry's federal aid consisted entirely of loans, then Kerry may return the $340 owed to the federal government in accordance with the terms of the promissory note. Kerry will need to contact the bursar's office (email@example.com) to settle the outstanding tuition bill.
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