Introduction
This volume covers how a school should manage Title IV funds when a student completely withdraws from a payment period or period of enrollment.
Throughout the Federal Student Aid Handbook (FSA) we use “college,” “school,” and “institution” interchangeably unless a more specific use is given. Similarly, “student,” “applicant,” and “aid recipient” are synonyms. “Parents” in this volume refers to the parents of dependent students, and “you” refers to the primary audience of the Handbook: financial aid administrators at colleges. “We” indicates the U.S. Department of Education (the Department, ED), and “Title IV aid” is used to identity federal financial aid offered by the Department.
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Changes for 2025-2026
There were no major regulatory changes or updates to Volume 5 in the 2025-26 award year Federal Student Aid Handbook.
Please note that many of the R2T4 requirements outlined in the final rules contained in 90 FR 470 (January 3, 2025) will not be effective until July 1, 2026 and will be discussed in the 2026–27 FSA Handbook. However, there are two new regulatory requirements – LOA allowances for incarcerated students enrolled in term-based Prison Education Programs (PEPs) and a new withdrawal exemption treating students as never attended – that schools can early-implement as noted below.
In Chapter 1, under the “R2T4 Withdrawal Exemptions” section, we inserted a discussion of the new withdrawal exemption allowing schools to treat students as never attending if certain requirements are met. The new withdrawal exemption was outlined in the January 3, 2025 final regulations, which schools have an option of early implementing as of February 3, 2025.
We added guidance under the “Approved Leave of Absence” section in Chapter 1, which expanded the exception to not have a student resume training at the same point they began the LOA for students enrolled in an eligible Prison Education Programs (PEP) that uses a term-based academic calendar. This new LOA allowance was also outlined in the January 3, 2025 final regulations, which schools have an option of early implementing as of February 3, 2025.
Under “Payment Period” in Chapter 1, we provided clarification on when a student would officially be considered to have begun the next payment period if the student completes a payment period on the same day they withdraw.
In Chapter 1, under “Funds to Include in an R2T4 Calculation,” we removed references to the Iraq and Afghanistan Service Grant as that program no longer exists and has been replaced by additional eligibility within the Pell Grant program.
We added guidance in the “Title IV Aid Disbursed” section in Chapter 2 Part 1 clarifying that schools cannot alter the types of aid disbursed in the R2T4 calculation once a student has withdrawn.
In Chapter 2 Part 1, under “Determining the Length of Scheduled Breaks,” we added an example explaining school options when some students still have class during a portion of a formal scheduled break.
In Chapter 2 Part 2, under “Order of Return of Title IV Funds,” we removed references to the Iraq and Afghanistan Service Grant as that program no longer exists and has been replaced by additional eligibility within the Pell Grant program.
Within the Volume 5 Appendix, we created updated R2T4 worksheets as of July 1, 2025 removing references to the Iraq and Afghanistan Service Grant.
Occasionally the Department publishes additional questions and answers to the Program Integrity - Return of Title IV Funds Question & Answer (Q&A) section of the Department’s website. We recommend periodically checking for new information and guidance.