Posted Date: July 20, 2015

Author:  Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid

Subject: 150% Direct Subsidized Loan Limit: Electronic Announcement #18 - Implementation of Loss of Interest Subsidy Based on Enrollment

Under the 150% Direct Subsidized Loan Limit requirements, a borrower who has no eligibility for additional Direct Subsidized Loans due to the 150% limit may lose interest subsidy on existing Direct Subsidized Loans if the borrower continues enrollment in an undergraduate program. Because the loss of the interest subsidy on existing loans is triggered by the borrower's enrollment, not whether the student has requested or received Title IV aid, we use enrollment information that schools report to the National Student Loan Data System (NSLDS) to determine whether the borrower is subject to a loss of interest subsidy.

Effective with the first reporting of enrollment information to NSLDS by schools on or after October 1, 2014 (and retroactive to July 1, 2014), schools are required to report program-level enrollment information to NSLDS. Over the past several months, we have worked to ensure that schools are meeting this requirement so that we can implement the loss of subsidy provision of the 150% Direct Subsidized Loan limit rules. We are now ready to do so.

This week we will implement the functionality in NSLDS to identify borrowers who have lost eligibility for the interest subsidy on their existing Direct Subsidized Loans and will distribute the results to the federal loan servicers. The servicers will then begin applying the loss of subsidy to the affected borrowers' Direct Subsidized Loans, and will communicate with those borrowers about their responsibility for accruing interest that resulted from the loss of subsidy. We estimate that approximately 6,000 borrowers will be impacted by this initial implementation of the loss of subsidy functionality.

Because we delayed the implementation of the loss of subsidy provision while we worked with schools to ensure that NSLDS has complete and accurate enrollment information, many of the affected borrowers will have a loss of subsidy effective date that is in the past. Some of these borrowers may have already entered repayment on the Direct Subsidized Loans for which they are now responsible for accruing interest, and as a result, servicers will likely have to adjust the borrowers' monthly payment amounts upward to account for the additional accrued interest.

The federal loan servicers will serve as initial points of contact for borrowers who have questions about their loss of interest subsidy, and will also facilitate the resolution of any dispute that arises as a result of the borrower's loss of interest subsidy. If we determine that a student lost interest subsidy due to a school's incorrect reporting of data, the school must correct the COD or NSLDS reporting error. Once that occurs the loan servicer will reverse the accruals and make other necessary adjustments to the student's account.

We thank schools for their continued cooperation as we implement these statutory changes.

For questions about the 150% limit, please email questions to 150Percent-Questions@ed.gov.

   

End of Page