Financial Student Aid Regulation Changes: Determining the R2T4 Denominator (Updated)

By Parker Charlton | October 22, 2021

Update (10/19/21): The department of Education (ED) has issued additional guidance effective 10/6/21 for Institutions not using an R2T4 Freeze Date: 

If the student is only eligible for Pell Grant, Iraq-Afghanistan Service Grant, and/or TEACH Grant funds during the period and the institution does NOT use an R2T4 Freeze Date, the days in a module/course must be included in the denominator of the R2T4 calculation only if the student actually attends the module/course. This is because Pell Grant, Iraq-Afghanistan Service Grant, and TEACH Grant recalculation requirements ultimately require institutions to exclude from consideration in the student’s enrollment status any coursework that the student did not attend.

If the student is eligible for Direct Loan or FSEOG funds during the period (regardless of eligibility for other Title IV programs) and does NOT use an R2T4 Freeze Date, the days in a module/course must be included in the R2T4 calculation if the student was enrolled in the module/course on the first day of the period or enrolled in the module/course at any time during the period. This is because a student’s cost of attendance for these programs is affected by the student’s enrollment in all modules during a payment period or period of enrollment.

Update (9/8/21): M&A has confirmed with the Department of Education (ED) that institutions will not be held responsible for good faith interpretations of the new Return to Title IV (R2T4) regulations made prior to the release of the updated R2T4 guidance on August 20, 2021. R2T4 calculations based on reasonable interpretations of ED guidance shared prior to 8/20/21, are not deemed incorrect, nor have to be recalculated. An institution may, but is not required to, redo a previously performed R2T4 calculation, according to the new guidance in the program integrity Q&As.

We have also added a third example to the list below.

ORIGINAL ARTICLE

The latest round of Federal Student Aid regulatory upheaval had some major implications for Return to Title IV (R2T4) implementation, as we discussed in a recent blog post. Specific attention, however, must be paid to how the Department of Education now requires institutions to determine the denominator, or number of scheduled days to use, in the R2T4 calculation for terms that include modules.

This can be a complicated process, depending on the number of factors, so we’re providing this breakdown to introduce the changes and provide some examples of how to determine the denominator.

Exclusions

Before counting the days, be sure to account for breaks between modules by excluding:

  • Scheduled breaks of five or more consecutive days, just like we always have.
  • Breaks that occur after the student is no longer enrolled during the period.
  • Breaks that, when combined with a module that the student is not scheduled to attend, become five or more consecutive days.

Do not exclude breaks of less than five days, such as between modules. This is different than with a 49% calculation, where breaks between modules are excluded.

Methods

In another notable change, there are now two options to determine the number of days a student was scheduled to complete in the period that contains modules.

  1. No R2T4 Freeze Date: If not using an R2T4 freeze date, use the student’s enrollment status that was used to determine the amount of the student’s Title IV aid for the period. In this method, if the student adds and drops classes throughout the semester, it can cause the number of days to change until their withdrawal.

We anticipate most schools will choose this method, so here are some important points:

  • Institutions must determine the number of days the student was scheduled to complete in the period by looking at the coursework used to determine the amount of the student’s Title IV aid eligibility for the period.
  • Institutions must include all days of a module in the R2T4 denominator if the student attended at least one day during the module, or if they did not attend any days in the module, but the module was included when determining the Title IV aid amount.
  • The types of aid the student received may affect the number of days used in the R2T4 calculation.
  1. Use an R2T4 Freeze Date: Use the student’s enrollment schedule at a fixed point based on registration/enrollment practices of most students. The freeze date cannot occur prior to the date most students use to enroll for classes. Institutions are also not permitted to structure timing of the student’s enrollment such that most students are only enrolled in a single module when the freeze date would occur but then later enroll in other modules and receive additional Title IV aid.

Examples

Because most schools are leaning toward not using a freeze date to determine the R2T4 denominator, we’re providing these examples to describe how the method is used.

  • Example 1: We have a 106-day semester with a 53-day session (Session I), a 3-day break and a 50-day session (Session II). On the first day of the payment period a student is registered for one three-credit course in Session I and one three-credit course in Session II. The student was awarded a half-time disbursement of a Pell Grant and no other Title IV aid. The student then dropped out 25 days into Session I. What is the denominator?

Because the student didn’t start Session II, a Pell recalculation is necessary, and the Pell is reduced to less than half-time. The denominator will be 53 because only the 53 days in Session I were used to determine the Title IV aid the student was awarded.

  • Example 2: Using the same semester length, module lengths and module enrollment as above, the student is awarded a half-time disbursement of a Pell Grant and Direct Loans. The student then completes Session I and drops prior to Session II.

A Pell recalculation is again needed, but this time the R2T4 denominator is 106 because the student received a Direct Loan and was enrolled/scheduled in a class for Session I and Session II.

  • Example 3: An institution offers a program that uses 120-day standard terms with no scheduled breaks. The term includes four modules which are each 30 days long (Modules A, B, C, and D). Each module consists of one three-credit class, and the institution’s definition of full-time enrollment is 12 credits. None of the modules overlap and the institution does not use an R2T4 Freeze Date.

A student who is eligible for both Pell Grant and Direct Loan funds enrolls in Modules A and B. The student attends Module A, but in the middle of that module, the student drops Module B. The student registers for Modules C and D at the same time Module B is dropped. The student successfully completes Module A. The student does not ultimately attend either Module C or Module D and is therefore considered withdrawn.

The institution must include the days from Modules A, B, C, and D in the R2T4 calculation because the student was eligible for Direct Loan funds (in addition to Pell Grant funds) and the student was enrolled in all four of those modules during the period. The denominator of the R2T4 calculation would include 120 days.

A Pell recalculation is again needed, but this time the R2T4 denominator is 120 because the student received a Direct Loan and the aid was based on credits from Session I and II.

The changes to how we determine the R2T4 denominator and the broader set of financial aid regulatory changes present challenges for institutions, but McClintock & Associates is here to help. Check out our latest webinar on the changes, or set up a chat with one of our experts today.

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