For-Profit Tuition Refund Policy

Note: This for-profit tuition refund policy has been updated to implement the changes to newly enacted Iowa House File 644 (Effective July 1, 2021). All modifications to this refund policy are reflected below. The Iowa Legislature’s website will not reflect these changes until later this year.

What is the Iowa Tuition Refund Policy?

Under Iowa Code Section 714.23, tuition refund policies apply to a refund (i.e., reduction) of tuition charges the school assesses, regardless of whether and to what extent those charges have been paid by the student or some source of financial aid.

What schools must adopt Iowa’s tuition refund policy for withdrawn students?

A for-profit school that offers at least one program leading to a postsecondary educational credential, which may include but is not limited to:

  • An academic or professional degree, diploma, license, or other certification or designation, regardless of whether the school awards the credential.
  • A certificate, badge, or other type of professional credential awarded by a corporation or employer (e.g., “microcredentials” such as those issued by software companies like Microsoft, Adobe, etc.)

Which for-profit schools do not have to adopt the 714.23 refund policy?

  • Personal vehicle driving education schools
  • Postsecondary vocational schools that offer solely discrete continuing education courses
  • A for-profit school that offers solely programs for which the sum of tuition, fees, instructional materials, technology, and other items required for program completion is less than three thousand dollars

What students must be covered under this tuition refund policy?

  • All students attending a for-profit school located in Iowa. The school must apply the Iowa tuition refund policy to all of the school’s students, even though some may attend shorter programs.
  • All Iowa resident students attending distance education programs offered by a for-profit school regardless of the school’s location in the United States.

What are the Iowa Tuition Refund formulas?

Iowa Code describes refund formulas for a student who withdraws from a for-profit school. Schools must adopt either a School-friendly Formula or a Student-friendly Formula as well as the Exceptional Formula.  More detailed information about these formulas is provided below:

School-friendly Formula

A for-profit school shall refund all tuition charges to a student who withdraws within the first two calendar weeks of instruction.

A for-profit school shall make a pro rata refund of tuition charges to a student who terminates from any of the school’s postsecondary educational programs or courses after the first two calendar weeks in an amount that is not less than ninety-five percent of the amount of tuition charged to the student multiplied by the ratio of the number of calendar days remaining in the school period to the total number of calendar days in the school period. If a terminating student has completed sixty percent or more of a school period, the school offering the postsecondary educational program is not required to refund tuition charges to the student.

Schools with a cohort default rate less than 110% of the national average as described in Iowa Code 714.23(2)(b), or schools with no default rate, may cease offering a refund of tuition charges on or after the 60% point in the school period for which the student was charged. The school’s first step is to determine the 60% point in the period for which the student was charged.

Note: The school-friendly and exceptional refund policies apply to for-profit schools that do not have a cohort default rate or for those whose cohort default rate for students under the Stafford loan program as reported by the United States Department of Education for the most recent fiscal year is less than one hundred ten percent of the national average cohort rate. 

School-friendly Formula Example

ABC School offers a 120 day computer science program and charges $5,000 for tuition. Joe Student attends ABC school but decides to drop out after completing 24 days. How much of a tuition refund is he owed? 

Determine the 60% Point

.60 (sixty percent) x 120 (total # of calendar days of the school period) = 72 days. 

If the student attended 72 days or more of the school period, the school would not be required to refund the student.   In the above example, the student dropped out at 24 days and therefore did not reach the 60% point (or 72 days).  The school would need to issue the student a refund using the formula below.

Formula for Calculating Student Refund

a) 120 (total # of calendar days in the school period) – 24 (# of calendar days the student completed in the school period) = 96 (# of calendar days the student failed to complete in the school period)

b) 96 ÷ 120  = 0.8 (percentage of the school period that the student failed to complete)

c) 0.8 x $5,000 (tuition charges for the school period) = $4,000 (amount of refund prior to school’s administrative charges)

d) $4,000 x .95 (Iowa law allows the school to retain 5% in administrative charges) = $3,800 (minimum tuition charge refund/ reduction owed to the student)

Notes:

Iowa law prescribes no rounding procedures. Schools should develop a set of rounding rules that the school applies consistently to all students. Iowa College Aid reserves the right to review the school’s application of its rounding rules.

In the case of a program in which student progress is measured only in clock hours, all occurrences of “calendar days” shall be replaced with “scheduled clock hours”.

OR

Student-friendly Formula

A for-profit school shall refund all tuition charges to a student who withdraws within the first two calendar weeks of instruction.

A for-profit school shall make a pro rata refund of tuition charges to a student who terminates from any of the school’s postsecondary educational programs or courses after the first two calendar weeks in an amount that is not less than ninety-five percent of the amount of tuition charged to the student multiplied by the ratio of the number of calendar days remaining in the school period to the total number of calendar days in the school period.

Schools with cohort default rates greater than 110% of the national average as described in Iowa Code 714.23(2)(c), would be required to apply the student-friendly tuition refund policy.

Note: This policy applies to for-profit schools whose cohort default rate for students under the Stafford loan program as reported by the United States Department of Education for the most recent fiscal year is more than one hundred ten percent of the national average cohort rate or six percent, whichever is higher.

Student-friendly Formula Example

ABC School offers a 120 day computer science program and charges $5,000 for tuition charges. Joe Student attends ABC school but decides to drop out after completing 24 days. How much of a tuition refund is he owed? 

60% Point is Non Applicable

Schools required to use the student-friendly tuition refund policy, cannot cease offering a refund of tuition charges on or after the 60% point in the school period for which the student was charged. Therefore, proceed to the formula below.

Formula for Calculating Student Refund

a) 120 (total # of calendar days in the school period) – 24 (# of calendar days the student completed in the school period) = 96 (# of calendar days the student failed to complete in the school period)

b) 96 ÷ 120  = 0.8 (percentage of the school period that the student failed to complete)

c) 0.8 x $5,000 (tuition charges for the school period) = $4,000 (amount of refund prior to school’s administrative charges)

d) $4,000 x .95 (Iowa law allows the school to retain 5% in administrative charges) = $3,800 (minimum tuition charge refund/ reduction owed to the student)

Notes:

Iowa law prescribes no rounding procedures. Schools should develop a set of rounding rules that the school applies consistently to all students. Iowa College Aid reserves the right to review the school’s application of its rounding rules.

In the case of a program in which student progress is measured only in clock hours, all occurrences of “calendar days” shall be replaced with “scheduled clock hours”.

AND

Exceptional Refund Formula

The exceptional refund policy as described in Iowa Code § 714.23(4) applies when a student terminates a postsecondary educational program after the first two calendar weeks due to the student’s physical incapacity or, for a program that requires classroom instruction, due to the transfer of the student’s spouse’s employment to another city. The terminating student shall receive a refund of the tuition charges in an amount that equals the amount of tuition charged to the student multiplied by the ratio of the remaining number of calendar days in the school period to the total number of calendar days in the school period.

Exceptional Refund Formula Example

ABC School offers a 110 day (total # of calendar days in the school period) computer science program and charges $5,000 for tuition. Joe Student attends ABC school but his spouse is transferred to a different state.  Therefore, Joe Student must drop out after completing 26 days. How much of a tuition refund is he owed? 

Formula for Calculating Student Refund

a) 110 (total # of calendar days in the term) - 26 (# of calendar days the student completed in the term) =  84 (# of calendar days the student failed to complete in the term)

b) 84 (# of calendar days the student failed to complete in the term) divided by 110 (total # of calendar days in the term) = .76  (the percentage of the term that the student failed to complete)

c) .76 (the percentage of the term that the student failed to complete) X $5,000 (tuition charge for the term) = $3,818.18 (minimum tuition charge refund/reduction to the student)

Notes:
Iowa law prescribes no rounding procedures. Schools should develop a set of rounding rules that the school applies consistently to all students. Iowa College Aid reserves the right to review the school’s application of its rounding rules.

In the case of a program in which student progress is measured only in clock hours, all occurrences of “calendar days” shall be replaced with “scheduled clock hours”.

What are the additional requirements of the Iowa Tuition Refund Policy?

1. A for-profit school that assesses tuition charges to the student at the beginning of each course, term, payment period, or other period that is shorter than the postsecondary educational program’s length shall base its tuition refund on the amount of tuition costs the school charged for the course, term, or other period in which the student terminated. A school shall not base its tuition refund calculation on any portion of a postsecondary educational program that remains after a student terminates unless the student was charged for that remaining portion of the postsecondary educational program before the student’s termination and the student began attendance in the school term or course. Note: Payment period means the same as set forth in 34 C.F.R. §668.4.

2. A refund of tuition charges shall be provided to the student within forty-five days following the date of the school’s determination that a student has terminated from a postsecondary educational program.

3.  A student who terminates a postsecondary educational program shall not be charged any fee or other monetary penalty for terminating the postsecondary educational program, other than a reduction in tuition refund as specified above.

4. Note to SARA Schools: A for-profit school offering instructional programs or courses under an interstate reciprocity agreement entered into or recognized by the commission under chapter 261G shall apply the policy it adopts under this section to Iowa resident and nonresident students who attend distance education programs the school offers under the interstate reciprocity agreement.

How does a for-profit school demonstrate compliance?

A for-profit school demonstrates compliance as part of the school’s application for authorization to operate under Registration, Exemption from Registration, or Financial Responsibility.

Who do I contact?

For further information, contact the Postsecondary Authorization Team