Eligibility and enrollment status for retaking coursework 34 CFR 668.2(b)
The regulatory definition for full-time enrollment status (for undergraduates) has been revised to allow a student to retake (one time only per previously passed course), any previously passed course. For this purpose, passed means any grade higher than an “F,” regardless of any school or program policy requiring a higher qualitative grade or measure to have been considered to have passed the course. This retaken class may be counted towards a student’s enrollment status and the student may be awarded Title IV aid for the enrollment status based on inclusion of the class.
A student may be repeatedly paid for repeatedly failing the same course (normal SAP policy still applies to such cases), and if a student withdraws before completing the course that he or she is being paid Title IV funds for retaking, then that is not counted as his or her one allowed retake for that course. However, if a student passed a class once then is repaid for retaking it and fails the second time, that failure counts as their paid retake, and the student may not be paid for retaking the class a third time.
If your school has a policy that requires students to retake all of the coursework for a term in which a student fails a course, any courses retaken that were previously passed in this case are not eligible for Title IV aid.
For a list of retaking coursework Q&A’s (updated in late 2011), visit the U.S. Dept. of Education website with regard to 'Program Integrity Questions and Answers-Retaking Coursework'.