What Are Title 4 Funds? A Breakdown of Federal Student Aid

Title IV funds are federal financial aid programs established under Title IV of the Higher Education Act of 1965. This legislation provides financial assistance to students pursuing post-secondary education. Institutions with Title IV status are accredited by the U.S. Department of Education, indicating they meet educational standards and can disburse these funds to eligible students. The purpose of Title IV funds is to enhance access to higher education by helping students manage associated costs.

Categories of Title IV Funds

Grants

Federal student aid includes various forms. Grants do not require repayment. The Federal Pell Grant is awarded to undergraduate students demonstrating significant financial need. The Federal Supplemental Educational Opportunity Grant (FSEOG) provides funds to undergraduate students with exceptional financial need and is administered directly by participating schools.

The Teacher Education Assistance for College and Higher Education (TEACH) Grant offers up to $4,000 annually to students committed to teaching in high-need fields at schools serving low-income students. Recipients must fulfill a service obligation; failure to meet this obligation results in the grant converting to an unsubsidized loan with accrued interest.

Loans

Federal loans must be repaid. Direct Subsidized Loans are for undergraduate students with financial need. The U.S. Department of Education pays the interest on these loans while the student is enrolled at least half-time, during the grace period, and during deferment.

Direct Unsubsidized Loans are for both undergraduate and graduate students, regardless of financial need. Interest accrues from the first disbursement, with the borrower responsible for all interest. Direct PLUS Loans are for graduate or professional students and parents of dependent undergraduate students, requiring a credit check. A loan fee is deducted proportionally from each disbursement of Direct Subsidized and Unsubsidized Loans.

Federal Work-Study

Federal Work-Study (FWS) provides part-time employment for undergraduate and graduate students with financial need. This program allows students to earn money for educational expenses. Work-Study earnings are paid directly to the student and are not automatically applied to tuition. Students can use these funds for various educational costs. The program encourages work related to the student’s field of study or community service.

Eligibility for Federal Student Aid

General Requirements

To qualify for federal student aid, applicants must be a U.S. citizen or an eligible non-citizen, such as a lawful permanent resident. A high school diploma, a General Educational Development (GED) certificate, or completion of an approved homeschool program is necessary. Students must also be enrolled or accepted as a regular student in an eligible degree or certificate program at an institution participating in federal student aid programs.

Ongoing Requirements

Maintaining satisfactory academic progress (SAP) is an ongoing requirement. Each institution defines its own SAP policy, which includes criteria like a minimum grade point average, course completion rate, and maximum timeframe for degree completion. A valid Social Security Number (SSN) is generally required, with exceptions for citizens of the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau.

For the 2025-26 award year, Selective Service registration is no longer required for federal aid. Students must not be in default on federal student loans or owe a refund on a federal grant. Drug convictions can also affect eligibility.

The Application Process

FSA ID Creation

The application for federal student aid involves completing the Free Application for Federal Student Aid (FAFSA). A crucial initial step is creating an FSA ID, which serves as a username and password for accessing U.S. Department of Education online systems and acts as a legal electronic signature. Both the student and, if applicable, a parent, will need separate FSA IDs. Use a personal email address and phone number for the FSA ID, as these should remain accessible for future account management.

Document Gathering and FAFSA Completion

Before beginning the FAFSA, applicants should gather necessary documents, including tax returns, child support records, and current balances of cash, savings, checking accounts, and investments. The FAFSA form allows for the automatic transfer of federal tax information directly from the IRS, simplifying the process. Completing the FAFSA online involves providing personal information, selecting schools to receive aid information, and inputting financial data.

Submission and Student Aid Report (SAR)

Submit the FAFSA as early as possible each year, typically after October 1 for the following academic year. While the federal deadline is June 30, many states and colleges have earlier priority deadlines, and some aid is awarded on a first-come, first-served basis. After submission, applicants receive a Student Aid Report (SAR), which summarizes the FAFSA data and includes the calculated Student Aid Index (SAI), formerly known as the Expected Family Contribution. Schools then use this data to determine the student’s financial aid package.

Disbursement and Maintaining Eligibility

Fund Disbursement

After FAFSA completion and school processing, an award letter details the types and amounts of federal student aid offered. Students must accept or decline the aid through their school’s financial aid portal or by returning a signed document. Federal student aid funds are disbursed directly to the student’s school. These funds are applied to institutional charges, such as tuition and fees, typically in at least two installments over the academic year.

Any remaining funds after institutional charges are covered are issued as a refund directly to the student. These amounts help cover other educational expenses, including living costs, books, and supplies. Students must use all federal aid responsibly for legitimate educational purposes. Continuing eligibility for federal student aid hinges on maintaining satisfactory academic progress (SAP), as defined by the institution. This means meeting minimum grade point average requirements, successfully completing a certain percentage of attempted coursework, and completing the program within a maximum timeframe.

Impact of Enrollment Changes

Changes in a student’s enrollment status, such as dropping from full-time to half-time, can impact the amount of federal aid received. Aid packages are adjusted based on enrollment intensity. Students who withdraw from school before completing the academic period may need to repay a portion of the federal student aid received. The repayment amount is calculated based on federal regulations.