u.s. department of education march 27, 2014 nmasfaa conference

U.S. Department of Education

March 27, 2014

NMASFAA Conference

The New 150% Limit on Subsidized Direct Loans - How it Affects Both Your School and Your Students

Kevin CampbellTraining Officer Region [email protected]

A copy of this presentation is on www.NMASFAA.orgPlease complete ED’s survey regarding this presentation:

https://s.zoomerang.com/s/KevinCampbell-TX

Laws and Regulations

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Higher Education Act of 1965 has been Amended Resulting from the Moving Ahead for Progress in

the 21st Century Act (MAP-21)

150% Direct Subsidized Loan Limit – Interim Final Rule Published May 16, 2013 Comment Period Ended on July 1, 2013

Revised Final Rule published on January 16 Electronic Announcement Posted on January 17

MAP-21

• Limits the length of time a student borrower may enjoy the subsidy on a Direct Loan

• Intent is to encourage students to progress through their academic programs in a timely manner

• Intent is to save money

Helpful Definitions and Terms

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Subsidized Direct Loan

• DL that ED pays, or subsidizes, the interest while the borrower is in school at least half time• Also for certain other statuses

• Borrower must have need to qualify• COA-EFC=Need

• The subsidized interest is a benefit to the borrower and does not get repaid

• Unsubsidized DL – ED does not pay the interest• Either paid by borrower while in school or capitalized

into the loan itself and is paid by borrower in repayment

SULA

• Subsidized Usage Limit Applies• Used to describe applicable

loans and borrowers

Definition of Academic Year• Title IV Academic Year

• The AY defined for Title IV purposes• Minimum of 900 clock hours AND 26 weeks of instruction• Minimum of 24 semester/36 quarter credit hours and 30 weeks of instruction

• AY Used to determine DL annual loan limits• Borrower Based Academic Year (BBAY)• Scheduled Academic Year (SAY)

• SULA usually uses the second definition• One exception

First-Time Borrower and Consequences

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First-Time Borrower

Applies only to first-time borrowers as of July 1, 2013: Student who has no outstanding balance on a FFEL or Direct Loan when receiving a Direct Loan on or after July 1, 2013.

Example A

Example B

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Consequence 1: Eligibility LossBorrower loses eligibility for additional Direct Subsidized Loans when borrower has received Direct Subsidized Loans for 150% of their current academic program

If eligibility is lost, borrower still eligible for Direct Unsubsidized Loans

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Generally measured in time, not dollars.

Consequence 2: Interest Subsidy Loss

Based on enrollment in any program,

not borrowing or requesting aid

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First Consequence: Loss of Eligibility for Further Subsidized Direct Loans

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Determining When Eligibility is Lost

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150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less).

Let’s examine the formula used for SULA:

Maximum Eligibility Period

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150% limit is met (eligibility is lost) when remaining eligibility

period is zero (or less).

Maximum Eligibility Period

• Maximum eligibility period is 150% of the published length of borrower’s current or upcoming academic program• Varies by program• Multiply published length of program by 1.5• Measured in academic years or portions• ED will calculate using school-reported information

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Converting Months/Weeks To Years

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• This is the exception where the definedTitle IV AY is used

Subsidized Usage Period

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150% limit is met (eligibility is lost) when remaining eligibility

period is zero (or less).

Subsidized Usage Period• A Subsidized Usage Period is the period of

time for which a borrower receives a Direct Subsidized Loan

• Calculated loan-by-loan• Measured in academic years or portions• Rounded, up or down, to nearest tenth of a year*• Includes only periods when Direct Subsidized Loan received

• ED will calculate using school-reported information*

*changed from IFR

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Calculating Subsidized Usage Period

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Example 1: Usage-Credit Hour

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Program is semester-based. Scheduled academic year includes the fall and spring semesters. Student receives one term loan for fall semester only.

Begin Date End Date Number of Days

Loan Period August 27, 2013 December 21, 2013 117

Academic Year August 27, 2013 May 17, 2014 264

Subsidized Usage Period = 117/264 = .44 Years Rounded to .4 Years

Example 2: Usage-Clock Hour

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Program is 600 clock hours and 20 weeks of instruction. Scheduled academic year is 900 clock hours and 26 weeks of instruction. Student receives a subsidized DL for the program.

Begin Date End Date Number of Days

Loan Period August 27, 2013 January 13, 2014 140

Academic Year August 27, 2013 February 24, 2014 182

Subsidized Usage Period = 140/182 = .76 Years Rounded to .8 Years

Enrollment Status Exception

Calculated subsidized usage period is prorated by enrollment status

Proration occurs before rounding

Clock hour and Non-term credit hour students are all considered to be full time for this purpose

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Annual Loan Limit Exception

Only circumstance where dollars are considered is when a student receives a Direct Subsidized Loan in the amount of the annual loan limit

Can only occur for standard-term programs or for non-standard-term programs that are substantially equal and are each at least nine weeks in length

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Loan Period & Academic Year

• Determines the Subsidized Usage Period• Covered in DCL GEN-13-13, applies to all

Direct Loans• Loan Period – period of enrollment for which

borrower received loan• Must be updated if student’s actual enrollment or

eligibility doesn’t match originally reported loan period

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Loan Period & Academic Year

• Academic year – period to which the annual loan limit applies• For credit-hour programs that use standard terms or

non-standard SE9W terms, corresponds to calendar period of terms in SAY or BBAY

• For clock-hour programs or credit-hour programs that use non-standard NSE9W terms or do not use terms, corresponds to period of time required for borrower to complete a Title IV academic year’s worth of coursework (BBAY3)

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Updating Loan Periods

• Student does not enroll for a payment period covered by the originally reported loan period

• Student withdraws from a payment period and all loan funds associated with the payment period are returned (R2T4)

• Student cancels all of a disbursement of a loan that is attributable to a payment period

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Updating Loan Periods - Continued

• Student is not otherwise eligible for a loan for a payment period covered by the loan period

• The student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled

*This is a non-exhaustive list

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Updating Academic Years

• If you have terms and use a scheduled academic year (SAY) and • Student is attending a program for which summer is not

a “required” term, and• Attends summer, and• Receives a loan for summer

• Academic year must be updated to include the summer

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Updating Academic Years

• Student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled

• Academic year must be updated to reflect the increased time it is taking

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Concept is based on 1:1 Ratio

• Loan Period is one academic year• AY is one academic year• Student receives both disbursements (Fall & Spring)• Student has used one year’s eligibility for subsidized DL• 1:1 ratio• If student only received one disbursement AND it was

less than the full years annual loan limit• Student has used ½ of one year’s eligibility for

subsidized DL• ½:1 ratio

Scope of Guidance

• Applies to all Direct Loans first disbursed on or after July 1, 2013

• Applies to all Direct Loan types• Applies to all students • Applies to all eligible programs and coursework • ED will monitor compliance with loan period and

academic year date reporting

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Determining When Limit Is Met

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150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less).

Remaining Eligibility Period

How much eligibility a borrower

has left under the 150% limit.

•Accounts for Direct Subsidized Loans received for all enrollment in all programs (except teacher certification programs)•Eligibility for subsidy is lost when remaining eligibility is zero or less•ED will calculate using school-reported information

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Example 3: Remaining Eligibility

Student receives 5 full years of Direct Subsidized Loans while enrolled in a 4-year program.

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Maximum Eligibility Period 6 Years

All Subsidized Usage Periods 5 Years

Remaining Eligibility Period 1 Year

Example 4: Remaining Eligibility

Student receives 3 years of Direct Subsidized Loans while enrolled in a 2 year program.

Student then transfers to a 4 year program.

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After year 3 of 2-year program

Upon transfer to 4-year program

Maximum Eligibility Period 3 Years 6 Years

All Subsidized Usage Periods 3 Years 3 Years

Remaining Eligibility Period 0 Years 3 Years

Example 5: Remaining EligibilityStudent receives 1 year of Direct Subsidized Loans while enrolled in a 2-year program.

Student transfers to a 1-year clock-hour program.

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After year 1 of 2-year program

Upon transfer to 1-year cert. program

Maximum Eligibility Period 3 Years 1.5 Years

All Subsidized Usage Periods 1 Year 1 Year

Remaining Eligibility Period 2 Years 0.5 Years

Minimum loan period length in a clock-hour program is lesser of length of program or academic year. School cannot disburse a Direct Subsidized Loan to this student.

Second Consequence:Loss of Interest Subsidy on Subsidized Loans Student Already Owns

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Loss of Interest Subsidy Benefits

Subsidy loss is effective on the

date of the triggering enrollment

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Enrollment Types: Subsidy Loss

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Periods of Interest Subsidy

Borrower with interest subsidy:

Borrower who lost interest subsidy:

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Subsidized Period

Unsubsidized Period

Which interest is the borrower’s?

Subsidy loss is not retroactive to the date of disbursement or from the date of the loss of

eligibility. Loss of subsidy is from the date of the enrollment that caused the loss of subsidy

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Example 6: Subsidy Loss

Student received 6 years of Subsidized Loans while enrolled in a 4 year program. Student does not complete and enrolls for a 7th year.

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Maximum Eligibility Period 6 Years

All Subsidized Usage Periods 6 Years

Remaining Eligibility Period 0 Years

Subsidy Loss Yes, enrolled with no remaining eligibility and without completing


Student is enrolled in a 2 year program and received 3 years of Subsidized Loans. Student enrolls for one more semester in the same

program, and then transfers to a 4-year program.

• Student regains eligibility for Subsidized Loans upon transfer.• Any new Subsidized Loans will have interest subsidy.• Prior Subsidized Loans that lost subsidy do not regain subsidy.

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Before transfer Upon transfer



Remaining Eligibility Period 0 Years 3 Years

Subsidy Loss Yes, borrower enrolled after eligibility loss.

No, borrower enrolled in a longer program.


Student received 5 years of Subsidized Loans while enrolled in a 4-year program. Student completes the program and then enrolls in a 2-year program

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End of year 5 Upon transfer



Remaining Eligibility Period 1 Year -2 Years

Subsidy Loss No, borrower has remaining eligibility.

No, borrower graduated from prior program.

Example 9: Subsidy LossStudent received 5 full years of Direct Subsidized Loans while enrolled in a 4-year program. Student does not complete and then enrolls in a 2-year program.

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End of year 5 Upon transfer



Remaining Eligibility Period 1 Year -2 Years

Subsidy Loss No, borrower has remaining eligibility.

Yes, transfer caused borrower to exceed max.

DL – Lost Subsidy

• Subsidized DL that has lost subsidy is still considered a subsidized loan

• Does not become an unsubsidized loan• Important for calculating aggregate DL limits

Special Provisions

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Preparatory Coursework

• Preparatory coursework needed for enrollment in an undergraduate or certificate program• Up to $2,625 in Subsidized DL for one consecutive 12-month period

• Preparatory coursework needed for enrollment in a graduate/professional degree or certificate program• Up to $5,500 in Subsidized DL for one consecutive 12-month period

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Prep Coursework for Undergraduate Program

• Maximum eligibility period for preparatory coursework required for enrollment in undergraduate program• Limited to maximum eligibility period applicable to undergraduate program for which preparatory coursework is required

• Enrollment in preparatory coursework does not increase the maximum eligibility period

• Enrollment in preparatory coursework for entry into an undergraduate program may result in borrower becoming responsible for accruing interest on existing Direct Subsidized Loans

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Prep Coursework for Graduate/Professional Prog.• Maximum eligibility period for preparatory coursework

required for enrollment in graduate/professional program• Limited to maximum eligibility period for the undergraduate

program for which borrower most recently received subsidized loan

• Borrower with no remaining eligibility period may not receive subsidized loans to complete required coursework• May receive unsubsidized loans

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Prep Coursework for Graduate/Professional Prog.

Enrollment in preparatory coursework needed for entry into graduate/professional program does NOT result in borrower becoming responsible for accruing interest on outstanding subsidized loans

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Non-Credential Teacher Certification

• Student enrolled in teacher certification coursework that does not lead to a credential offered by the school is eligible for Direct Loans• Coursework must be required for certification by the state to teach elementary/secondary school

• Student may receive up to an annual loan limit of $5,500 in Subsidized DL for teacher certificate coursework

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Non-Credential Teacher Certification• Maximum eligibility period limited to 150% of published

length of the teacher certification program• Only subsidized loans received for teacher certification

coursework are in included in the borrower’s subsidized usage period

• Enrollment in teacher certification coursework counts only against the maximum eligibility period for the borrower’s teacher certification coursework

• Enrollment in teacher certification coursework does not cause a borrower to become responsible for accruing interest on any subsidized loans

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Short-Term Programs in 2013-2014

• First-time borrowers are always eligible to receive their first Subsidized Loan under the 150% limit

• Most borrowers will not receive a second loan before schools begin using 2014-2015 COD that will track the 150% limit for schools

• Possible for students in short-term programs to have 150% eligibility limitation

• School must make own determination – can use ED developed spreadsheet

• More information in 150% EA #5

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Short-Term Programs in 2013-2014

For this specific purpose only a short-term program one that is shorter than:•1.5 years•10 months•40 weeks

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Enrollment Status in 2013-2014

• Used to prorate Subsidized Usage Periods• 2014-2015: Schools will report enrollment status to

COD, including three-quarter time enrollment• 2013-2014: COD does not have enrollment status and

NSLDS does not have three-quarter time enrollment status• NSLDS reported enrollment status will be used - half-time if reported as “at least

half-time but less than full-time”

• More information in 150% EA #3

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Unsubsidized Loan Eligibility

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Now let’s see, how much is that unsub going to be?Now let’s see, how much is that unsub going to be?

Eligibility for Unsubsidized Direct Loans

A student cannot receive Direct Unsubsidized Loans for a loan period until the student has received all Subsidized Loan eligibility

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Example 10: Eligibility for Unsub.

Based on COA and EFC, a second-year dependent student is eligible for a Direct Subsidized Loan in the amount of the full annual loan limit of $4,500

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Scenario 1 Amount

Base amount (sub. loan)

$4,500

Base amount (unsub. loan)

N/A

Add’l amount (unsub. loan)

$2,000

Scenario 2 Amount


$4,000


$0


$0

Received full subsidized loan amount

Did NOT receive full subsidized loan amount

Example 11: Eligibility for Unsub.

Based on COA and EFC, a second-year dependent student is eligible for a Direct Subsidized Loan in an amount that is less than the full annual loan limit: $4,000

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Scenario 1 Amount


$4,000


$500


$2,000

Scenario 2 Amount


$3,800


$0


$0

Received full subsidized loan amount that he/she was eligible for

Did NOT receive full subsidized loan amount that he/she was eligible for

School Reporting to ED

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COD Reporting Requirements

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Other Changes to COD

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Other Changes to COD

• Each time school submits an origination or disbursement record COD will:• Calculate Subsidized Usage Periods, including the new

loan• Inform school of borrower’s Maximum Eligibility, Subsidized

Usage, and Remaining Eligibility periods

• COD will also inform borrower in disclosure statement

• Watch for EA in April describing the COD SULA enhancements

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NSLDS Reporting Requirements

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Other Changes to NSLDS

• Modify professional access and student view to display 150%-related information

• Modify reports available to schools to include 150%-related information

• Inform Direct Loan servicers of borrowers enrollment and loss of interest subsidy

• Pass information about student’s current Subsidized Usage Period and whether the student has lost interest subsidy to CPS, for inclusion on the SAR/ISIR

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The following NSLDS fields will be added to the ISIR:

•These fields will be passed from NSLDS to CPS starting with 2014-2015 at the borrower level during pre-screening •A SAR Comment 267 will be triggered when SULA Flag is set to Y•New NSLDS Post-Screening Reason Code 25 value will be added: Subsidized Usage Applies Flag Status Change

Added Value

Subsidized Usage Limit Applies Flag (SULA) Y/N

Subsidized Loan Eligibility Used (SLEU) 000v000

NSLDS -150% Subsidy Loan Limit

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The following NSLDS fields will be added to the ISIR:

•These fields will be passed from NSLDS to CPS starting with 2014-2015 at the borrower level during pre-screening •A SAR Comment 267 will be triggered when SULA Flag is set to Y•New NSLDS Post-Screening Reason Code 25 value will be added: Subsidized Usage Applies Flag Status Change

Added Value

Subsidized Usage Limit Applies Flag (SULA) Y/N

Subsidized Loan Eligibility Used (SLEU) 000v000

ISIR - 150% Subsidy Loan Limit

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• SAR Comment 267• There is a limit to the total amount of subsidized federal

student loans that you may receive. Please visit Studentaid.gov and select Types of Aid/Loans for more information.

• Reason Code 25 will be added to the NSLDS Post-screening for a Subsidized Usage Limit Applies Flag status change.

150% Subsidy Loan Limit

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• SAR Comment 267• There is a limit to the total amount of subsidized federal

student loans that you may receive. Please visit Studentaid.gov and select Types of Aid/Loans for more information.

• Reason Code 25 will be added to the NSLDS Post-screening for a Subsidized Usage Limit Applies Flag status change.

150% Subsidy Loan Limit

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Loan Counseling

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Entrance Counseling

• Entrance Counseling regulations have been amended to include these new requirements:• Possible loss of eligibility for additional Direct Subsidized Loans

• How a borrower’s maximum eligibility period, remaining eligibility period, and subsidized usage period are determined

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Entrance Counseling

• Potential for a borrower becoming responsible for all accruing interest on Direct Subsidized Loans during in-school periods, grace periods, and periods of authorized deferment

AND• The impact of borrower responsibility for accruing

interest on the borrower’s total debt

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Exit Counseling

• Exit Counseling regulations have been amended to include these new requirements:• The sum of the borrower’s subsidized usage periods at

the time of the exit counseling• How to get information from NSLDS on whether he or

she has become responsible for accruing interest on any of his or her Direct Subsidized Loans and whether the borrower is eligible to receive additional Direct Subsidized Loans

Exit Counseling

• The possible consequences of receiving additional Direct Subsidized Loans for additional undergraduate programs

• The potential for a borrower becoming responsible for all accruing interest on Direct Subsidized Loans during in-school periods, grace periods, and periods of authorized deferment, even if the borrower does not receive an additional Direct Subsidized Loan

Entrance Counseling Resources

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Let’s Put This In Perspective!

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Perspective

• ED will keep track of student eligibility• ED will notify students of eligibility issues• ED will set up a process, in the near future, for dispute resolution

• ED will share eligibility data with the CPS so it appears on ISIRs and SARs

Perspective

• Schools will report the length of program to COD in loan origination record

• Schools will ensure that students are counselled with new SULA provisions

• Schools will make eligibility determinations for the remainder of 13-14 award year for first-time borrowers who pursue to “short” programs in the award year

Perspective

• Preparatory Coursework has special provisions• Teacher Certification, that does not lead to an academic credential granted by the school, has special provisions

Perspective

• Exceeding SULA will not end student’s eligibility for unsubsidized DLs

• Annual and aggregate loan limits still apply• Loss of subsidy will usually not be the deciding factor for student in whether to pursue a program or not

Resources

IFR

Final Regs

DCL GEN 13-13

FAQs

Three Recorded Webinars

EAs

Watch for Electronic Announcement in April describing the new COD release which will allow for SULA reporting.

Watch for Electronic Announcement in April describing the new COD release which will allow for SULA reporting.

QUESTIONS?

E-mail: [email protected]

Subject: Include organizational affiliation

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Kevin CampbellTraining Officer Region [email protected]

Please complete ED’s survey regarding this presentation:

https://s.zoomerang.com/s/KevinCampbell-TX

u.s. department of education march 27, 2014 nmasfaa conference

Documents

subsidized direct loans

eligibility lossborrower

loss of eligibility

subsidized direct loandl

direct unsubsidized

direct loanintent

academic years

student borrower