Posted Date: November 12, 2013
Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid
Subject: 150% Direct Subsidized Loan Limit: Electronic Announcement #5 - Limited School Calculation of Remaining Eligibility
As noted in 150 Percent Direct Subsidized Loan Electronic Announcement #1, posted to IFAP on May 16, 2013, we published interim final regulations implementing the new 150% Direct Subsidized Loan Limit statutory requirements that are applicable to first-time borrowers on or after July 1, 2013.
The regulations create and define the terms “Maximum Eligibility Period”, “Subsidized Usage Period”, and “Remaining Eligibility Period”. Maximum Eligibility Period is a period of time equal to 150% of the published length of the academic program in which the borrower is enrolled. Subsidized Usage Period is generally, the period of time for which the first-time borrower received a Direct Subsidized Loan. Remaining Eligibility Period is the difference between the borrower’s Maximum Eligibility Period and the sum of the borrower’s Subsidized Usage Periods. All of these periods are measured in full or partial academic years.
COD System Functionality
Beginning with this coming spring’s release of the Common Origination and Disbursement System (COD System) for 2014-2015, schools will submit the information that is needed for the COD System to calculate Maximum Eligibility Periods, Subsidized Usage Periods, and Remaining Eligibility Periods for borrowers subject to the 150% limit. The 2014-2015 COD System release will also have edits to prevent Direct Subsidized Loans from being made to first-time borrowers who have lost eligibility for those loans as a result of the 150% limit.
Remaining Eligibility for Short-Term Academic Programs
There is a very limited set of circumstances in which a first-time borrower could lose eligibility for Direct Subsidized Loans during 2013-2014. These circumstances are limited because:
The 150% Direct Subsidized Loan Limit applies only to “first-time borrowers” on or after July 1, 2013;
Borrowers cannot lose eligibility under the 150% Direct Subsidized Loan limit until they have received at least one Direct Subsidized Loan; and
Most academic programs are at least one year in length and would therefore have a Maximum Eligibility Period of at least 1.5 years, resulting in the earliest possible loss of Direct Subsidized Loan eligibility being for 2014-2015.
For the above reasons, the only time a first-time borrower might not be eligible for a Direct Subsidized Loan during 2013-2014 is when the borrower has received a Direct Subsidized Loan for 2013-2014 and is being considered by a school for a second or other subsequent Direct Subsidized Loan for 2013-2014. And then only if the second or subsequent loan is for an academic program is shorter in length than 1.5 years, 10 months, or 40 weeks.
Below are two examples that illustrate how the above circumstances apply for 2013-2014. Example 1 describes a situation where a student would not be eligible to receive a second Direct Subsidized Loan for 2013-2014. Example 2 describes a situation in which, even though the student’s enrollments were in short-term programs, the student would be eligible for a second Direct Subsidized Loan.
Example 1 –
A first-time borrower receives a Direct Subsidized Loan for enrollment in a 13-week clock-hour program with a defined Title IV academic year of 26 weeks of instructional time (the minimum for a clock-hour program). This student would have a Subsidized Usage Period of 0.50 years (13 weeks divided by 26 weeks) for that Direct Subsidized Loan.
The student subsequently enrolls in another short-term clock-hour program, which has a published length of 15 weeks. The Maximum Eligibility Period for the new 15-week program is 22.5 weeks or 0.87 years (22.5 weeks divided by 26 weeks). Subtracting the 0.50 Subsidized Usage Period of the first loan from the Maximum Eligibility Period of 0.87 years for the new program, leaves the student with a Remaining Eligibility Period of 0.37 years. However, the student cannot use the 0.37-year Remaining Eligibility Period for the new 15-week program, because under the for clock-hour programs, other non-term programs, and certain non-standard term programs, the minimum length of a loan period is the shorter of the length of the program or the academic year. In this example, the shorter period is the 15 week length of the program, which results in a Subsidized Usage Period of 0.5 years. Since a 0.50-year Subsidized Usage Period is greater than the student’s Remaining Eligibility Period of 0.37 years, the student is not eligible for a Direct Subsidized Loan for enrollment in the 15-week program.
Example 2 –
A first-time borrower receives a Direct Subsidized Loan for enrollment in a 10-week clock-hour program (the minimum length of a clock-hour program for Direct Loan purposes) with a defined Title IV academic year of 26 weeks of instructional time (the minimum for a clock-hour program). Under the regulations, this student would have a Subsidized Usage Period of 0.38 years rounded down to 0.25 years for the Direct Subsidized Loan received for enrollment in the 10-week program.
The student subsequently enrolls in another short-term clock-hour program with a published length of 18 weeks. The Maximum Eligibility Period for the new 18-week program is 27 weeks or 1.04 years (27 weeks divided by 26 weeks). Subtracting the 0.25-year Subsidized Usage Period of the first loan from the Maximum Eligibility Period of 1.04 years for the new program leaves the student with a Remaining Eligibility Period of 0.79 years.
In this instance, under the Direct Loan origination rules described in Example 1, the school would originate a Direct Subsidized Loan with a loan period of 18 weeks (the length of the program), which would result in a loan with a Subsidized Usage Period of 0.69 years, rounded to 0.50 years. Since a 0.50-year Subsidized Usage Period is less than the student’s Remaining Eligibility Period of 0.79 years, the student is eligible for a Direct Subsidized Loan for enrollment in the 18-week program.
School Calculation of Remaining Eligibility
As noted earlier, beginning with 2014-2015 release, the COD System will, based on information provided by schools, perform all of the required calculations to determine if the student has eligibility for additional Direct Subsidized Loans, and if so, what the student’s Remaining Eligibility Period is. However, because the 2013-2014 COD System does not include those features there are a very limited number of instances where a school will need to calculate certain borrowers’ Remaining Eligibility Periods prior to originating a Direct Subsidized Loan. This calculation must be performed by schools only in the following limited circumstances:
The borrower is a first-time borrower on or after July 1, 2013;
The borrower previously received a Direct Subsidized Loan (at any school) that was first disbursed on or after July 1, 2013;
The school is considering the student for another Direct Subsidized Loan for the borrower’s enrollment in a program with a published length that is:
For programs measured in years, less than 1.5 years;
For programs measured in months, less than 10 months; or
For programs measured in weeks, less than 40 weeks.
The school plans on originating the new Direct Subsidized Loan using the 2013-2014 COD System release.
To emphasize, schools need not perform this special calculation if the subsequent loan will be originated using the 2014-2015 COD System release.
Optional Excel Worksheet
To assist schools in performing the required calculations, we have developed the attached interactive Excel worksheet in “protected” format. Once the school enters a limited amount of information for the borrower, the worksheet will calculate the borrower’s Maximum Eligibility Period, Subsidized Usage Periods, and Remaining Eligibility Period. The school must then determine, using the results of the worksheet, if the borrower’s Remaining Eligibility Period is sufficient for the student to receive an additional Direct Subsidized Loan, taking into account the Direct Loan origination regulations discussed above.
The interactive Excel worksheet includes four steps:
Step 1 helps a school determine whether it must continue to use the worksheet. The school must complete lines 1 through 4. The answer to whether the school must complete the remainder of the worksheet is on line 5.
Step 2 helps a school calculate the Subsidized Usage Periods for the first-time borrower’s previously received Direct Subsidized Loan(s) and the Direct Subsidized Loan that the school is considering for the borrower. The school must complete all parts of lines 6 through 8 (as applicable) for the worksheet to calculate and display the Subsidized Usage Periods.
Schools should pay particular attention to the warning in line 9, which is a reminder that the loan period and academic year dates on the worksheet must comply with the minimum loan period length and academic year length requirements as provided in the Direct Loan regulations at 34 CFR 685.301 and discussed in DCL GEN-13-13. School compliance with these date requirements is important since they will determine whether the school can originate the Direct Subsidized Loan. The worksheet does not include edits to prevent a school from inputting inaccurate dates.
Schools should also pay particular attention to line 10, which is a reminder that they must populate the “enrollment status” field for lines 6 through 8, using the borrower’s enrollment status as reported in NSLDS or as the school will report to NSLDS. For the reasons discussed in 150% Direct Subsidized Loan Limit Electronic Announcement #3, the school must populate the worksheet field with “half-time” if the borrower was enrolled at least half time but less than full time at any time during the Direct Subsidized Loan’s loan period.
Step 3 helps schools calculate the Maximum Eligibility Period for the program for which the school is considering the first-time borrower for a Direct Subsidized Loan. All schools must complete lines 11 and 12. Schools whose programs are measured in weeks or months must also complete line 13.
Step 4 provides schools with the borrower’s Remaining Eligibility Period, incorporating the Direct Subsidized Loans described in Step 2, and information on whether the school can originate the loan described in line 8. It is this final worksheet produced result that the school must use to determine if it can originate the proposed Direct Subsidized Loan.
Most schools will not have to perform these calculations since they do not have educational programs that are shorter than 1.5 years, 40 weeks, or 10 months. For those schools that offer short-term programs, the number of students requiring calculations will be limited because most first-time borrowers enrolled in those short-term programs will not receive more than one Direct Subsidized Loan in 2013-2014.
For questions relating to the Excel worksheet referenced above, please send an email message to 150Percent-Questions@ed.gov. Please include the organizational affiliation in the subject line.
We thank all schools for assisting us during this period of transition.