Nautochia Webb October 28, 2015 U.S. Department of Education Awarding & Processing Direct Loans...

Nautochia Webb October 28, 2015

U.S. Department of Education

Awarding & Processing Direct Loans

NYSFAAA

Agenda

Direct Loan BasicsAcademic YearSubsidized Usage Limit Applies (SULA)CalculationsProrating Annual Loan LimitsTransfer StudentsResources

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Direct Loan Basics

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Direct Loan Basics

• William D. Ford Federal Direct Loan Program (“Direct Loan” or “DL”)

• Loan types include• Subsidized Stafford (Sub) - Only for undergraduates

• Unsubsidized Stafford (Unsub) - For undergraduates, graduates, and professional students

• PLUS Loan for Graduate and Professional Students (unsubsidized)

• PLUS Loan for Parents (unsubsidized) - For parents of dependent students

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• Regulations at 34 C.F.R.§685 (link from IFAP)

• Source of funds is the U.S. Treasury• Money is transmitted via ED’s G5

system• Signed MPN or eMPN required• Counseling required – Entrance &

Exit

Direct Loan Basics

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Loan Limits

Students are subject to annual and aggregate loan limitsDependent upon the student’s financial aid package, student may not be eligible to borrow the full amount

Annual Loan Limits

YearDependent

Undergraduate

Independent Undergraduate

And Dep. Undergrad whose parent can’t borrow PLUS

Graduate/ Professional

Student1st $5,500

(maximum $3,500 subsidized)

$9,500(maximum $3,500

subsidized)

Up to $20,500 each academic year

(all unsubsidized)

2nd $6,500(maximum $4,500

subsidized)

$10,500(maximum $4,500

subsidized)

3rd and Beyond

$7,500(maximum $5,500

subsidized)

$12,500(maximum $5,500

subsidized)

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Aggregate Loan Limits

Dependent Undergraduate

$31,000 combined sub/unsubNo more than $23,000 in sub

Independent Undergraduate*

$57,500 combined sub/unsubNo more than $23,000 in sub

Grad/Professional $138,500 combined sub/unsubNo more than $65,500 in sub

* Also for dependent students whose parents are unable to obtain a PLUS loan

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General Loan Awarding Principles

Must award subsidized before awarding unsubsidizedBase Amount may be all subsidized, all unsubsidized, or a combination.

Subsidized amount may not exceed the Base AmountAnnual Loan Limit includes the Base Amount and Additional Unsubsidized

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Reminder: All general Title IVstudent eligibility requirements

also apply

Student must:• Be enrolled at least half-

time• Meet eligibility

requirements, except for:• Preparatory

coursework • Teacher certification

coursework

School must:– Determine Pell eligibility

before loans – Determine loan eligibility

• Subsidized eligibility before Unsubsidized

• No Adverse Credit history for PLUS borrowers

• Aggregate limits• Other Title IV eligibility

requirements

General Direct Loan Requirements

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Direct Loan Interest Rates – 2015-16Direct Loans first disbursed on or after July 1, 2015 but before July 1, 2016

• Undergrad Sub and Unsub – 4.29% (cap 8.25%)

• Grad Unsub – 5.84% (cap 9.5%)

• PLUS – 6.84% (cap 10.5%)

• Consolidated Loans – weighted average of underlying loans rounded up to the next higher one-eighth of one percent (no cap)

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Direct Loan Fees – 2015-16

Direct Loan Feesfor FY 2015 and FY 2016

Loan Type Impacted Loans Loan FeePercent

Fee Example

Direct SubsidizedLoans and Direct

UnsubsidizedLoans

FY 2015First disbursed on or after

October 1, 2014 and beforeOctober 1, 2015

1.073 $59.01 on a$5,500 loan



1.068 $58.74 on a$5,500 loan

Direct PLUSLoans (Parentand Grad/Prof

Student



4.292 $429.20 on a$10,000 loan



4.272 $427.20 on a$10,000 loan

Loan fee calculations that result in more than two decimal places must be truncated (not rounded) to two digits after the decimal point (cents)

Direct Loans first disbursed on or after July 1, 2015 but before July 1, 2016

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Subsidized Stafford Loan Eligibility• Subsidized loans are need-based

COA – EFC – EFA = Loan Eligibility (Up to the Annual Subsidized Amount)

• Interest is subsidized during:• In-School

• Grace periods

• Deferments

• School must determine eligibility before eligibility for unsubsidized loans

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Limit on how many years a “first-time borrower” may receive subsidized loans.

Applies to first-time borrowers on or after July 1, 2013. A first-time borrower is one who –

Has no balance on any FFEL or Direct Loan on July 1, 2013, or

Receives first Direct Loan (any type) on or after July 1, 2013

Subsidized Loan Eligibility Limit or

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Condition - When student has received Direct Subsidized loans for a period of time that is equal to 150% of the published length of the student’s current academic program

Result - Student may not receive additional subsidized loans for enrollment in that program or any program of equal or lesser length

Subsidized Loan Limit – 150% Rule

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Students maximum time to receive subsidized loans is established based on the length of the program the student is enrolled in

Remaining subsidized eligibility is calculated by subtracting from maximum eligibility for the program, the time the student has already received subsidized loans for enrollment in any program

Subsidized Loan Limit – 150% Rule

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Determining When 150% Limit is Met

Maximum

Eligibility

Period

Total

Subsidized

Usage

Periods

Remaining*

Eligibility

Periods

*150% Limit is met when Remaining Eligibility Period equals zero or less than zero

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Remaining Eligibility < 1 year:

Students can receive Direct Subsidized Loan if:

• The school can originate a Direct Subsidized Loan in compliance with all Direct Loan origination rules as provided in the regulations at 34 CFR 685.301, with particular attention to the applicable minimum loan period rules, and

• The loan's loan period, academic year, enrollment status, and loan amount results in a Subsidized Usage Period that is equal to or less than the student's Remaining Eligibility Period

For questions about the 150% limit, please email [email protected].

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mailto:[email protected]


COD Reporting = Accurate Enrollment Reporting

• All pending Direct Loan disbursements were reduced to zero.

• All loan amounts equal the total amounts disbursed.

• The borrower’s correct enrollment status was reported.

• Loan period have been adjusted to include only those payment periods (terms) for which the borrower received and retained an actual disbursement.

• Academic year dates reflect the defined length of a program’s academic year, and the dates were adjusted, when or if appropriate.

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Unsubsidized Stafford Loan Eligibility

• Unsubsidized loans are not need-based

COA – EFA = Unsubsidized Loan Amount (Not to exceed the annual loan limits)

• May replace EFC in packaging

• Borrower is responsible for interest• May be paid or may allow to capitalize

• School determines eligibility AFTER awarding subsidized loans

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Direct Unsubsidized Loan Eligibility

Student can only receive an unsubsidized loan (base or additional) for a loan period if the student has been awarded the full amount of his or her eligibility for a subsidized loan

Student who is not awarded his or her full subsidized loan eligibility may not receive any unsubsidized loan for the same loan period

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Unsubsidized Loan Flexibility

• For dependent Undergraduates whose parents are unable to borrow PLUS loans

• Due to adverse credit or• Due to exceptional circumstances

• May receive additional DL funds (same amounts as Independent Undergraduates)

• Flexibility extends for one Academic Year

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Unsubsidized Loan Flexibility

• FAA may use PJ to award Unsubsidized loans to dependent students without parental data• Parent must certify cessation of support and refusal

to complete the FAFSA• School must document both items• Not a Dependency Override (D/O)

• Student may receive up to his/her maximum dependent loan eligibility (Unsubsidized)

• Student not eligible for any other Title IV aid

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PLUS Loans

PLUS Loans:• May replace EFC• Have no Annual/Aggregate limit• Borrower must have no adverse credit• School must offer Sub and Unsub before awarding

PLUS• Amounts may not exceed COA – EFA

Available for:• Parents of dependent undergrads• Graduate/professional students

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Refusal to award a Loan

In Direct Loan Subsidized, Unsubsidized, and PLUS, a school has the authority to –

• Refuse to originate loan or• Originate a loan at less than the amount

requested by the student

• Must be done on an individual student basis• Must provide student with written explanation

34 CFR 685.301(a)(8) 25

Awarding Subsidized Loans

COA – EFC – EFA = Need

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Subsidized Eligibility - Tom

Subsidized Loan can be up to $3,500 of $5,500, but cannot exceed need

• EFA is:• Pell of $4,580• Scholarship of $6,500

• Remaining Need = $2,720

Tom is a 1st year DependentStudent(Annual Loan Limit = $5,500)

COA $15,000- EFC 1,200- EFA $11,080=Sub DL $ 2,720

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Awarding Unsubsidized Loans

COA – EFA = Eligibility

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Unsubsidized Eligibility - Tom

Unsubsidized Loan can be up to $2,780 ($5,500 - $2,720 in sub), but total aid cannot exceed COA

• EFA is:• Pell of $4,580• Scholarship of $6,500• Sub Loan of $2,720

• Remaining Eligibility = $1,200

Tom is a 1st year DependentStudent(Annual Loan Limit = $5,500)

COA $15,000- EFA $13,800=Unsub DL $ 1,200

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Awarding PLUS

COA – EFA = Eligibility

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Patrick’s Parent PLUS Eligibility

Patrick - 1st year Dependent student:

COA $20,000-EFA $9,500=PLUS eligibility$10,500

• Loan limit = COA-EFA• EFA now includes

– $4,000 Pell – $3,500 Subsidized loan– $2,000 Unsubsidized loan

• EFC not considered• Patrick’s parents may

borrow $10,500

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Patrick’s Increased Unsubsidized Eligibility:(If Parents denied PLUS, or if Patrick were

Independent)

Patrick - 1st year student (loan limit $9,500)

COA $20,000- EFA $7,500= Remaining Need $12,500

EFA includes:– $4,000 Pell– $3,500 Subsidized loan

• EFC not considered

• Patrick may borrow the lesser of:

• COA – EFA = $12,500 , or

• $9,500 - $3,500 = $6,000 (Annual Loan Limit-Sub Limit = Eligibility)

In an Unsubsidized loan

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Scheduled Academic Year (SAY)

Fixed period of time, usually corresponds to school’s official academic calendarGenerally begins at same time each yearExample – fall/winter/spring or fall/springSummer term may be either a “header” or “trailer”Summer mini-sessions may be treated as single term or individual terms

Scheduled Academic Year (SAY)

Loan period may include only portion of SAYPrograms offered in SAY may

Use BBAYAlternate between SAY and BBAY provided academic years do not overlapOnce SAY has passed, student is eligible for new annual loan limit

Borrower-Based Academic Year

Does not have fixed beginning and ending dates

“Floats” with student’s attendance and progressionBBAY must be used for any program that does not meet definition of program allowed to use SAY

Who Can Use Either and/or Both?

Credit-hour programs offered in a Scheduled Academic Year

SAY uses a traditional academic calendar with at least two semesters/trimesters or three quarters in fall through spring, ORComparable academic calendar with nonstandard SE9W terms

Each term is at least 9 weeks in lengthTerm lengths are within 2 weeks of each other

Scheduled Academic Year (SAY) Standard Term-based Program

2-Year Semester-Based Credit-Hour Program

Academic year = 24 Credits and 30 Weeks

Fall Spring

1st SAY

$3,500*

Fall Spring

2nd SAY

$4,500*

* Student in this example is a first-year dependent student who chooses to borrow only the base amount

SAY Eligibility for New Annual Loan Limit: Example 1

Fall Spring

1st SAY

$3,500*

Fall Spring

2nd SAY

$3,500*

Loan Period 1

• *Student in this example is a first-year dependent student who chooses to borrow only the base amount.

• Student does not advance to next grade level.

Loan Period 2

SAY Eligibility for New Annual Loan Limit: Example 2

Fall Spring

SAY

$5,500

Fall Spring

SAY

$4,500

Summer

Loan Period 1

Loan Period 2

Loan Period 3

$1,000* $3,500* $5,500*

• Student in this example is a second-year dependent student who chooses to borrow only the base amount.

• Student advances a grade level from Summer to Fall and chooses again to borrow only the base amount.

Borrower Based Academic Year 1(BBAY1)

Standard term credit-hour programs and comparable academic calendars with nonstandard SE9W may use BBAY1

BBAY must include the same number of terms as the school’s definition of an academic year

Student becomes eligible for new annual loan limit after BBAY calendar period has elapsed

BBAY1

Floats with student’s enrollment, but student must attend first term of BBAYMini-sessions must be combined as single termIf BBAY includes summer, may be shorter in weeks/hours than statutory academic year definition

Full-time must be defined as 12 credits

BBAY1Standard Term-based Program

Two Year Semester-Based Credit-Hour Program


1st BBAY

$3,500

2nd BBAY

$4,500

Spring 15 weeks

Summer 10 weeks

• Student in this example is a first-year dependent student who chooses to borrow only the base amount.

• Student advances a grade level from spring to summer by completing enough credits to do so.

Fall 15 weeks

Fall 15 weeks

BBAY1Standard Term-based Program

Two Year Semester-Based Credit-Hour Program


Spring Summer

1st BBAY

$3,500

Fall Spring

2nd BBAY

$4,500

• Student in this example is a first-year dependent student who chooses to borrow only the base amount.

• Student advances a grade level from summer to fall by completing enough credits to do so.

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Grade Level Progression

Completion of credits determines grade level progressionDo not confuse grade level progression with eligibility for a new annual loan limit Schools may develop own grade level standards but at a minimum must equal the minimum academic year definition Students in standard or nonstandard SE9W programs who advance to a higher grade level within an academic year may receive additional funds

Grade Level Progression in the Same Academic Year

Students in programs offered in standard terms or nonstandard SE9W terms who advance to a higher grade level within an academic year may receive additional funds

Prorating Annual Loan Limits

Annual loan limits must be prorated whenThe student is enrolled in a program that is shorter than a full academic year orThe student is enrolled in a remaining period of study shorter than a full academic year

For standard and nonstandard SE9W terms, if the remaining period contains fewer terms than in the school’s defined academic year

Loan Proration

Required for periods of study shorter than full academic year only when known in advance

No retroactive proration required when student originally enrolls for full year but completes program earlier

Loan Proration

Prorated loan limits are then used in the awarding process to determine student eligibility

Proration is NOT required for PLUS loansGraduate studentsTeacher certificationPreparatory coursework

Prorating for a Program Shorter Than a Full Academic Year

Multiply the applicable loan limit by the lesser of:

Hours enrolled in programHours in the defined academic year

Or

Weeks enrolled in programWeeks in the defined academic year

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Program Shorter Than an Academic Year

Program Length is 22 credit-hours and 28 weeks Defined academic year is 24 credit-hours and 30 weeks

Credits 22 = .92 24

Weeks 28 = .93 30

Annual Base Amount

$3,500 X 22 = $3,20824

Annual Unsubsidized (above base)

$2,000 X 22 = $1,833 dependent

$6,000 X 22 = $5,500 independent

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24

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EFC and COA Must Reflect Loan Period

Loan amounts for periods that are not equal to one academic year must be prorated

The EFC that most reasonably corresponds to the number of months in the loan period must be used to award the loan

The COA that reflects the costs incurred during the loan period must be used

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Prorating Remaining Periods Shorter than an Academic Year

Multiply the applicable loan limit by:

Hours remaining in program of studyHours required for defined Academic Year

Unlike proration for programs shorter than an academic year, only the hours are used.

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Remaining Periods Shorter Than an AY

6 credits 15 weeks

Remaining Portion of program must be

prorated

Program length is 30 semester credit-hours and 45 weeks

Academic year defined as 24 credit-hours and 30 weeks

Year 2 Loan Limits

Year 1 Loan Limits 12 credits 15 weeks

12 credits 15 weeks

Annual Base Amount

$4,500 X 6 = $1,12524

Annual Unsubsidized (above base)

$2,000 X 6 = $500 dependent

$6,000 X 6 = $1,500 independent

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Single Term Loans

A single term loan is one with a loan period of just one semester, trimester or quarter

Must use COA, EFC and EFA for only that one term to calculate loan eligibility

Multiple disbursement required unless school is exempt due to low cohort default rates

Overlapping Academic Years–Transfer Students

Must adjust loan for any amounts received in previous program if academic year overlaps new school’s academic year

Initially restricted to grade level annual loan limit at transfer school minus funds used at original school

Ineligible for new loan limit until student completes academic year from original school

Transfer Student Example #1Original School

9/8/15 5/13/16

Withdraws11/13/15

Loan Limit $3,500 / $2,000

Spring

Transfer School

11/17/15 5/20/16

Remaining $1,750 / $1,000

Winter Spring

Eligible for New Loan Limit

Fall Sub: $1,750Unsub: $1,000

Withdrawn Not Disbursed

Sub: $875 Unsub: $500

Sub: $875 Unsub: $500

Transfer Student Example #1Original School – Semester BasedLoan Period: 9/8/2015 to 5/13/2016

Grade Level One Dependent: $3,500/$2,000

Student Withdraws : 11/13/15

Amount Disbursed: $1,750 / $1,000

Transfer School – Quarter BasedStart Date: 11/17/15


Winter Quarter: 11/17/15 to 2/19/16

Spring Quarter: 2/22/16 to 5/20/16

Amount Disbursed: $1,750/$1,000

Transfer Student Example #2

Original School

9/8/15 5/13/16

Withdraws12/11/15

Sub: $2,250

Unsub: $1,000

Withdrawn

Not Disbursed

Loan Limit $4,500/$2,000

FALL Spring

Transfer School

1/12/16 5/27/16

Sub: $1,250

Unsub: $1,000

Loan Limit $3,500 / $2,000

Spring

Eligible for New Loan

Limit

First year Student at School B

Sub: $3,500 – $2,250

Remaining = $1,250

Unsub: $2,000 – $1,000

Remaining = $1,000

Transfer Student Example #2Original School – Semester Based

Loan Period: 9/8/2015 to 5/13/2016

Grade Level Two Dependent: $4,500/$2,000

Student Withdraws 12/11/15

Amount Disbursed: $2,250/$1,000

Transfer School – Semester Based

Start Date: 1/12/16

Student doesn’t have enough credits to be grade level two at this school


Loan Period: 1/12/16 to 5/27/16

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Obtaining Academic Year Dates

A school can obtain specific begin and end dates of the prior school’s academic year by:

obtaining documentation from the prior school, ORlook for the academic year dates of Direct Loans originated by the prior school on the “award detail information page” in COD

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Transfer Student Example

School A’s Academic Year

9/18/14

Withdrew11/29/2014

School B Loan Period12/15/14

3/13/15

3/13/15 0School B: New Loan period may begin on 3/14/15

School A: Used $1,750 Sub and $1,000 Unsub

School B: Student eligible for remaining $1,750 Sub and $,1000 Unsub

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Transfer Student Example

• Student attends School A with an academic year beginning 9/18/14 and ending 3/13/15

• Student withdraws from School A on 11/29/14• As grade level 1 student, this student received $1,750 in

Sub and $1,000 in Unsub• Student begins attendance at School B as a grade level 1

student on 12/15/14

Student may only receive remaining portion of loan not used until completion of School A’s academic year

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Resources

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ResourcesFSA HandbookVolume 3, Chapters 1 and 5

Dear Colleague Letters and Electronic AnnouncementsFederal Register dated May 16, 2013 (FR 28953)Electronic Announcement #19 (Updated October 8, 2015)Electronic Announcement #20 (October 19, 2015)

Site Linkshttps://studentaid.ed.gov/types/loanshttps://studentloans.gov

Direct Loan Training on IFAPwww2.ed.gov/offices/OSFAP/training/specific.html

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https://studentaid.ed.gov/types/loans

https://studentloans.gov/

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Questions?

Thank

You!

Contacts

New York School Participation Team Main Number: 646-428-3750

New York Training Officer Nautochia Webb: 646-428-3758

[email protected]

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This feedback tool will provide a means to educate and inform areas for improvement and support an effective process for “listening” to our customers

Additional feedback about training can be directed to [email protected]

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http://s.zoomerang.com/s/NautochiaWebb

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Nautochia Webb October 28, 2015 U.S. Department of Education Awarding & Processing Direct Loans...

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