A New Era

Novel research aims to understand impact of federal aid return programs on college students 

Every year, millions of college students receive financial aid from the federal government to support their pursuits in higher education, but realistically not all students complete the semester.

We are just beginning to understand the scope of a federal policy process—the Return of Title IV Funds, or R2T4—that determines whether and how much of that financial aid must be returned to the institution when students stop out.

Oded Gurantz, associate professor in the CU Boulder School of Education’s Research Evaluation and Methodology program, was lead author of a 2023 report, “Investigating the Scope and Implications of Return to Title IV Funds.” The report reflects the first-ever national study of R2T4 and was commissioned and published by the Institute of Education Services and the U.S. General Services Administration’s Office of Evaluation Sciences, where Gurantz is a fellow.

A new tool and dataset 

The study examined a novel dataset gleaned from a “Turbo-tax-like” online tool the federal government provides colleges and universities to support the often-complicated repayment calculations required when students withdraw midsemester—or before the 60-percent aid earned threshold. 

According to the report, about 11 million undergraduates received federal aid during the 2019-20 academic year. For fall 2019—on which the authors focus to avoid the impacts of COVID—the data analysis documented $150 million in R2T4 transactions, but given that many colleges opt not to use this tool the authors estimated $500 million is likely more accurate nationwide. These returns amount to approximately one-quarter of 1 percent of all federal Title IV aid, affecting 3-5 percent of all aid recipients.

“This affects tens of thousands of students, but in terms of the national scope, it’s relatively small,” Gurantz explained.

Additionally, less than 2 percent of Pell Grant recipients who withdrew were required to return any funds, with most of the required returns coming from federal loans the students expected to return anyway. This was a “heartening” finding for grant recipients, he said, and affected fewer students than expected.

While the bulk of the funds returned were from four-year public and nonprofit universities—those that receive the lion’s share of financial aid—for-profit private colleges saw higher percentages of students required to return aid.

The next chapter

Some universities have come under fire for practices like withholding transcripts until the institution has received repayment from former students. Concerns about such practices have laid the foundation for the initial study and led to more recent evaluation of student impacts.

Gurantz and colleagues have submitted preliminary findings to the U.S. Department of Education from a study, led by Ari Anisfeld at the University of Chicago, that found students required to return aid via R2T4 were less likely to re-enroll in college, with the largest enrollment declines found for Pell Grant recipients.

“It appears to have a negative impact on whether students return to college, and it seems that negative impact is concentrated among lower-income families,” he said.

As a scholar focused on gaps in college enrollment and completion for historically marginalized groups and someone who personally considered leaving college after a challenging first year, Gurantz believes this finding merits attention and action.

A step in the right direction 

More work lies ahead, but the Department of Education’s support of these evaluations is a step in the right direction, he said.

“The Education Department is moving forward and considering not doing things the same way they’ve done it for 50 years,” he said.

“The FAFSA Simplification Act is another example...Taking a form of a hundred questions and making it 30 questions is, on the face of it, a good thing. The government is attempting to be responsive, even if real-world implementation can be challenging.” 

Gurantz hopes studies of large, sweeping national education policies will continue to deepen.

“As academic researchers, it’s satisfying and rewarding to work in collaboration with state and federal governments to try to improve practices rather than just working in isolation or theoretically,” he said.

“In this era of reevaluating federal policies, this one (R2T4) seems right for reconsideration.”