Federal Student Aid has posted an electronic announcement reminding schools of the upcoming February 2, 2026 deadline to request a waiver of the underuse penalty for the Federal Work-Study (FWS) and Federal Supplemental Educational Opportunity Grant (FSEOG) programs for the 2026–27 award year.
Under the Higher Education Act, if a school returns more than 10% of its campus-based FWS or FSEOG allocation for the 2024–25 award year, the Department of Education will reduce the institution’s 2026–27 funding for that program by the amount of the unspent funds, unless the school requests and receives a waiver.
The February 2 deadline itself is not new — it was originally announced in a Federal Register notice published on May 22, 2025, titled “Federal Perkins Loan, Federal Work-Study, and Federal Supplemental Educational Opportunity Grant Programs: 2025–26 Award Year Deadline Dates” (90 FR 21909).
To determine whether an underuse penalty applies, institutions should review their most recent FISAP or the Campus-Based Tentative Funding Worksheets.
How To Determine if There Will Be an Underuse Penalty Prior To Receiving the Tentative Funding Worksheets
To determine if a school is subject to an allocation reduction in its 2026–27 FSEOG or FWS funds, review the 2026–27 FISAP that was due Oct. 1, 2025.
For FSEOG – Determine the underused percentage by dividing the unexpended 2024–25 funds in Part IV, Section E, Item 18 by the school’s 2024–25 FSEOG allocation in Part IV, Section A, Item 1. If that quotient is more than 10%, ED will reduce the 2026–27 FSEOG allocation by the total amount of unexpended 2024–25 FSEOG funds (Part IV, Section E, Item 18).
For FWS – Determine the underused percentage by dividing the unexpended 2024–25 funds in Part V, Section E, Item 19 by the school’s 2024–25 FWS allocation in Part V, Section A, Item 1. If that quotient is more than 10%, ED will reduce the 2026–27 FWS allocation by the total amount of unexpended 2024–25 FWS funds (Part V, Section E, Item 19).
Include Funds Returned Through Reallocation
Schools that returned 2024–25 FWS and/or FSEOG program funds to ED during the reallocation process in August must include those funds among the total allocation and unexpended amounts by program to determine their underuse percentage (even though the school does not report this amount on the FISAP).
How To Determine if There Is an Underuse Penalty Based on the Tentative Funding Worksheets
ED will post the Campus-Based tentative funding worksheets for 2026–27 to the Common Origination and Disbursement (COD) website by Jan. 30, 2026. If the school failed to expend more than 90% of its 2024–25 program allocation(s), ED will apply the underuse penalty to the tentative 2026–27 award allocations.
Schools may access their tentative funding worksheets from the COD website. From the School tab, select the link for Campus-Based at the bottom left of the navigation pane. Once directed to Campus-Based, select Self-Service. The percentage of underused FSEOG funds is located in the FSEOG tentative funding worksheet, Item 32. Underused Percentage, and the tentative FSEOG allocation reduction amount is located at Item 33. Allocation Reduction. The percentage of underused FWS funds is located in the FWS tentative funding worksheet at Item 35. Underused Percentage, and the tentative FWS allocation reduction amount is located at Item 36. Allocation Reduction. We will provide the full explanation of all the fields in the tentative funding worksheet in an attachment to an upcoming Electronic Announcement posted on the Knowledge Center.
How To Request an Underuse Penalty Waiver
Log in to the COD website and
- navigate to the “Forms and Waivers” page,
- select Manage Application,
- select the option to Create or Edit the underuse waiver, and
- submit the waiver (if a school did not already complete the underuse waiver via the FISAP submission process, it must use the “Forms and Waivers” page to create or edit the underuse waiver).
In the comment box, the school must explain or provide in detail
- the circumstances that caused the underuse of the allocation;
- why those circumstances were beyond the school’s control;
- why those circumstances are not expected to recur and/or how the school plans to prevent future underuse; and
- confirmation that the entire underused portion of the allocation has been returned to ED through G5.
Note: Schools should not attempt to submit or edit the underuse waiver by accessing their most recently submitted FISAP.
What Happens Next
ED will review the penalty waiver requests and justifications and will notify the school in an email to the school’s financial aid administrator of its decision to grant or deny the request.
If ED grants the waiver request, ED will not apply the underuse penalty for that program when it makes final awards for 2026–27.
If ED denies the waiver request, ED will apply the underuse penalty for that program when it makes final awards for 2026–27.
Contact Information
For questions regarding an underuse penalty waiver justification, contact the FSA Partner and School Relations Center at 1-800-848-0978. The contact center is open from 10 a.m. to 6 p.m. Monday through Friday, Eastern time. You may also email CODSupport@ed.gov.