FSA has released new guidance to support institutions in implementing updated Return of Title IV Funds (R2T4) regulations, which take effect July 1, 2026. These changes stem from the January 3, 2025 final rule and are designed to improve clarity, consistency, and accuracy in how schools handle student withdrawals and federal aid.
If your institution needs support with R2T4 calculations, College Aid Services is here to help. Contact us at 833-438-2271 or through our online form to get started.
Guidance from GENERAL-26-20:
Updates to the Regulations
The Jan. 3, 2025, final rule amended the R2T4 regulations at 34 CFR 668.22 in several areas. Several of the regulations are effective July 1, 2026, with no option for early implementation. These regulations do the following:
- Codify longstanding guidance (since the 2005–06 award year) that an institution that is required to take attendance must document the date of the institution’s determination that the student withdrew no later than 14 days after the student’s last date of attendance as determined by the institution from its attendance records. Please note that this regulation does not mean the institution must immediately withdraw the student and perform an R2T4 calculation.
As mentioned in Volume 5 of the Federal Student Aid Handbook and in the preamble to the final regulations, an institution that is required to take attendance has up to 14 days after the student’s last date of attendance to document the student’s withdrawal date, not necessarily to administratively withdraw the student. This allowance gives the institution time to determine a student’s enrollment or withdrawal status. However, the institution ultimately must ensure that the R2T4 calculation is completed no later than 30 days following the date of determination and that any required return of funds to the Department occurs no later than 45 days following the date of determination.
- Mandate that schools use a single method when using scheduled clock hours to calculate the percentage of the payment period or period of enrollment completed for a clock-hour program. Under the new regulations, for R2T4 purposes, the scheduled hours in a second or subsequent payment period or period of enrollment do not begin to accrue until the student successfully completes the prior period.
For example:
Academic Year: 900 hours
Payment Period: 450 hours
Total Scheduled Hours on Date of Withdrawal: 8 hours a day, 70 class days = 560 cumulative scheduled hours
Student completes 450 hours on day 68 (payment period #1) and withdraws on day 70 after just beginning their second payment period.
Payment Period Method
Scheduled hours for R2T4: 70 – 68 = 2 days, 16 hours
R2T4 Calculation: Percentage of payment period completed: 16 / 450 = 3.6% earned for second payment period
Although the student has attended sufficient days to constitute 560 scheduled hours (110 more than the 450 hours for the first payment period), only 16 scheduled hours have accrued since the student successfully completed the first payment period. This value is what must be used in the numerator of the calculation.
- Simplify R2T4 calculations that use modules by considering a module part of the payment period used in the denominator of the R2T4 calculation only when a student begins attendance in the module. Under the new regulations, schools will no longer need to consider which modules a student was scheduled to attend at the time of withdrawal, and therefore R2T4 Freeze Dates will no longer be applicable. The type of Title IV, HEA aid a student is eligible for and a school’s use of an R2T4 Freeze Date will no longer determine whether a school must use the days in a module when determining the number of scheduled days in a payment period.
Several of the regulations qualify for early implementation and could have been implemented as early as Feb. 3, 2025. These regulations do the following:
- Allow a confined or incarcerated individual in a term-based setting to return from an approved leave of absence at a different point in their eligible prison education program (PEP) than the point at which the student left off. Note that this allowance is optional. It is up to the institution to determine if they want to develop a formal LOA policy or not. In addition, if the institution determines that a leave of absence would not be appropriate based on the circumstances, it may take a more immediate approach, including an administrative withdrawal.
- Exempt institutions from performing an R2T4 calculation if (1) a student is treated as never having begun attendance; (2) the institution returns all Title IV, HEA aid disbursed to the student for that payment period or period of enrollment, including all Title IV, HEA credit balances provided to the student or parent; (3) the institution refunds all institutional charges to the student for that payment period or period of enrollment; and (4) the institution writes off or cancels any payment period or period of enrollment balance owed by the student to the institution due to the institution’s returning of Title IV, HEA funds to the Department. This exemption is called the “Full Refund Withdrawal Exemption.”
Special Considerations for the Full Refund Withdrawal Exemption
Below are some important things to note about this exemption:
- The withdrawal exemption is optional. Schools do not have to utilize it, and it can be applied on a student-by-student basis according to the school’s policy.
- Even though the school’s policy must treat the students as if they never attended, the school must still maintain documentation supporting the student’s initial Title IV, HEA eligibility and attendance. To apply the new withdrawal exemption, the school must be able to demonstrate that the student was eligible for Title IV, HEA funds.
- Since these are students who actually commenced attendance during a payment period or period of enrollment and are simply treated as if they never attended, the regulatory requirements under 34 CFR 668.21 do not apply.
- Students who cease attendance in all Title IV, HEA eligible coursework but remain enrolled in non-Title IV, HEA eligible coursework (e.g. auditing courses, etc.) do not qualify for the new withdrawal exemption because the school cannot meet all the required criteria in that circumstance. For example, the student will still be recorded as attending classes throughout the payment period and, therefore, the school would not be able to treat the student as never attending.
- For the new withdrawal exemption to apply, one of the criteria is that the school refund all institutional charges for a payment period or period of enrollment. There is no exception for certain types of institutional charges including books and supplies (if deemed an institutional charge), contracted housing or food, etc.
Reporting Requirements for the Full Refund Withdrawal Exemption
When financial aid administrators apply the new withdrawal exemption to treat a student as never having attended, they must use an existing enrollment status code of ‘X’ or ‘W’. Schools will use ‘X’ for students who never attended the school prior to the period for which the exemption will apply, and they will use ‘W’ for students who have attended in prior periods. When a ‘W’ code is used, the school is directed to backdate the withdrawal to the last date of attendance (LDA) of the prior attended period (since the student is treated as having never attended the current payment period). It is important to note that adjusting this date may impact a student’s grace period and/or repayment timeframe. Additional guidance regarding this new withdrawal exemption and enrollment reporting will be included in a future iteration of the NSLDS Enrollment Reporting Guide.
RESOURCES:
Any questions related to the new R2T4 regulations should be sent through the Customer Support form on the FSA Partner Connect website. When submitting a question, please enter your name, email address, topic, and question. When selecting a topic, please select “Policy Guidance.”
Additional information on the regulations that may be implemented early can be found in Volume 5 of the 2025–26 FSA Handbook. Complete information on all of the R2T4 regulations that are in effect July 1, 2026, will be published in the 2026–27 version of the handbook in the coming months.
(GENERAL-26-20) Implementation of Return of Title IV Funds (R2T4) regulations effective July 1, 2026
If your institution needs additional support with R2T4 calculations, contact College Aid Services at 833-438-2271 or through our online form to get customized support that fits your needs.