Returning unearned direct loan funds to the US Department of Education
London Metropolitan University is required by federal regulations to recalculate federal financial aid eligibility for students who withdraw, drop out, are dismissed, or take a leave of absence prior to completing 60% of a payment period or term. Any unearned loan funds must be returned to the US Department of Education. The University must return the amount of Title IV funds for which it is responsible no later than 30 days after the date of the determination of the date of the student's withdrawal.
Calculation used to determine unearned loan amounts for return
The federal Title IV funds below must be recalculated in these situations. Refunds are allocated in the following order:
- Unsubsidised federal direct loan
- Subsidised federal direct loan
- Direct federal PLUS loan
Recalculation is based on the percentage of earned aid using the following formula:
Percentage of payment period or term completed = the number of days completed up to the withdrawal date divided by the total days in the payment period or term. (Any break of five days or more is not counted as part of the days in the term.) This percentage is also the percentage of earned aid.
Funds are returned to the appropriate federal programme based on the percentage of unearned aid using the following formula:
Aid to be returned = (100% of the aid that could be disbursed minus the percentage of earned aid) multiplied by the total amount of aid that could have been disbursed during the payment period or term.
If a student earned less aid than was disbursed, the institution is required to return a portion of the loan unearned loan funds received and the student is required to return a portion of the unearned loan funds. Keep in mind that when Title IV funds are returned, the student borrower may still owe a tuition fee debit balance to the institution.