SECTION 1. Short title.

SEC. 2. Institutional refunds.

(1) in subsection (a)—

(A) in paragraph (1)—

(i) by striking “If a recipient” and inserting the following:

“(A) CONSEQUENCE OF WITHDRAWAL.—If a recipient”; and

(ii) by adding at the end the following:

“(B) SPECIAL RULE.—For purposes of subparagraph (A), a student—

“(i) who is enrolled in a program offered in modules is not considered withdrawn if the change in the student’s attendance constitutes a change in enrollment status within the payment period rather than a discontinuance of attendance within the payment period; and

“(ii) is considered withdrawn if the student follows the institution’s official withdrawal procedures or leaves without notifying the institution and has not returned before the end of the payment period.”;

(B) in paragraph (3)(B), by striking clauses (i) and (ii) and inserting the following:

“(i) 0 percent, if the day the student withdrew occurs when the student has completed (as determined in accordance with subsection (d)) 0 to 24 percent of the payment period or period of enrollment;

“(ii) 25 percent, if the day the student withdrew occurs when the student has completed (as determined in accordance with subsection (d)) 25 to 49 percent of the payment period or period of enrollment;

“(iii) 50 percent, if the day the student withdrew occurs when the student has completed (as determined in accordance with subsection (d)) 50 to 74 percent of the payment period or period of enrollment; or

“(iv) 75 percent, if the day the student withdrew occurs when the student has completed (as determined in accordance with subsection (d)) 75 to 99 percent of the payment period or period of enrollment.”; and

(C) in paragraph (4)—

(i) in subparagraph (A), by striking “Secretary), the institution of higher education shall contact the borrower” and inserting “Secretary), the institution of higher education shall have discretion to determine whether all or a portion of the late or post-withdrawal disbursement should be made, under a publicized institutional policy. If the institution of higher education determines that a disbursement should be made, the institution shall contact the borrower”; and

(ii) in subparagraph (B) by striking “institution or the student, or both, as may be required under paragraphs (1) and (2) of subsection (b), to the programs under this title in the order specified in” and inserting “institution, as may be required under paragraph (1) of subsection (b), to the programs under this title in accordance with”;

(2) by amending subsection (b) to read as follows:

“(b) Return of title IV program funds.—

“(1) RESPONSIBILITY OF THE INSTITUTION.—The institution shall return not later than 60 days from the determination of withdrawal, in accordance with paragraph (3), the amount of grant and loan assistance awarded under this title that has not been earned by the student, as calculated under subsection (a)(3)(C).

“(2) RESPONSIBILITY OF THE STUDENT.—

“(A) IN GENERAL.—The student is not responsible to return assistance that has not been earned; however, the institution may require the student to pay to the institution up to 10 percent of the amount owed by the institution in paragraph (1).

“(B) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to prevent an institution from enforcing the published institutional refund policies of such institution.

“(3) ORDER OF RETURN OF TITLE IV FUNDS.—

“(A) IN GENERAL.—Excess funds returned by the institution in accordance with paragraph (1) shall be credited to awards under subparts 1 and 3 of part A for the payment period or period of enrollment for which a return of funds is required.

“(B) REMAINING EXCESSES.—If excess funds remain after repaying all outstanding grant amounts, the remaining excess shall be credited in the following order:

“(i) To outstanding balances on loans made under this title to the student or on behalf of the student for the payment period or period of enrollment for which a return of funds is required.

“(ii) To other assistance awarded under this title for which a return of funds is required.”;

(3) by amending subsection (c) to read as follows:

“(c) Withdrawal date.—

“(1) IN GENERAL.—In this section, the term ‘day the student withdrew’—

“(A) for institutions not required to take attendance, is the date as determined by the institution that—

“(i) the student began the withdrawal process prescribed and publicized by the institution, or a later date if the student continued attendance despite beginning the withdrawal process, but did not then complete the payment period; or

“(ii) in the case of a student who does not begin the withdrawal process, the date that is the mid-point of the payment period for which assistance under this title was disbursed or another date documented by the institution; or

“(B) for institutions required to take attendance, is determined by the institution from such attendance records.

“(2) SPECIAL RULE.—Notwithstanding paragraph (1), if the institution determines that a student did not begin the withdrawal process, due to illness, accident, grievous personal loss, or other such circumstances beyond the student’s control, the institution may determine the appropriate withdrawal date under its own defined policies.

“(3) ATTENDANCE.—An institution is required to take attendance if an institution’s accrediting agency or State licensing agency has a requirement that the institution take attendance for all students in an academic program throughout the entire payment period.”; and

(4) by striking subsections (d) and (e).