There are two main types of student loans: federal student loans and private student loans. While the eligibility requirements and repayment terms differ for each type of loan, every student loan program defines upper limits on how much money students may borrow. Below we explain the maximum lifetime amounts that students are eligible to borrow for each type of loan. Maximum Borrowing Limits for Federal Student Loans Every federal student loan program has defined upper limits on how much students are eligible to borrow. Limits are imposed on annual and maximum borrowing amounts, and differ based on a few different factors:
The Federal Student Aid Office of the Department of Education defines the maximum permissible borrowing amounts for federal student loans. The maximum amount that dependent students may borrow is $31,000, of which not more than $23,000 may be in the form of subsidized loans. The maximum amount that independent students may borrow is $57,500, with the same upper limit ($23,000) on subsidized loans. Graduate students, who are always considered independent, can borrow the most - $138,500, with not more than $65,500 taken in the form of subsidized loans. However, the aggregate loan limit imposed on graduate students also includes any federal student debt incurred during undergraduate studies. Students may borrow above the maximum stated limits if they repay some of the debt that they already have incurred. However, in no case may a student borrow an amount that exceeds the cost of attending his or her school. Maximum Borrowing Limits for Private Student Loans Private lenders, such as banks and credit unions, independently set the terms for private student loans. As such, every private lender specifies a different upper limit for how much it is willing to loan to students. Private lenders typically consider the following factors when determining maximum permissible borrowing limits:
Many students do not obtain enough federal financial aid to adequately cover their costs. Receiving federal loans, even up to the maximum permissible amount, does not prevent a student from also borrowing from a private lender. As such, students often assume additional private loans to pay for the remainder of their expenses. The rules for awarding Direct Loans are different than for Pell Grants and other FSA programs. For Direct Subsidized Loans and Direct Unsubsidized Loans, there are annual loan limits that vary by grade level, and there are aggregate limits on the total
(cumulative) loan amount that may be outstanding at one time. The timing of Direct Loan disbursements may not always correspond to the timing of disbursements for other FSA programs. The requirement to prorate the annual loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans under certain circumstances differs from the requirements for calculating Pell Grants based on the student’s enrollment status. Origination is the process of creating a Direct Loan award in
the school’s system. Before originating a Direct Loan, a school must determine the student’s or parent’s eligibility for the loan. For each Direct Loan that a school disburses to a student or parent, the school must submit a loan award record to the Common Origination and Disbursement (COD) system that includes the student’s grade level, the loan period and academic year dates, the loan amount, the anticipated and actual dates and amounts of the loan disbursements, and other information.
Submission of a loan award record serves as the school’s certification that it has determined the borrower’s eligibility for the loan. A borrower’s eligibility for a Direct Loan is calculated differently than for a Pell Grant. There are no fixed tables such as the Pell Grant Payment and Disbursement Schedules that determine award amounts. The specific Direct Loan amount that a student or parent borrower is eligible to receive is determined based on various factors such as the student’s
cost of attendance (COA), expected family contribution (EFC), other estimated financial assistance (EFA), and remaining eligibility under the annual and aggregate loan limits. Some of these factors are relevant only when determining eligibility for certain types of Direct Loans. Direct Subsidized Loans and Direct Unsubsidized Loans have annual and aggregate limits that are the same for all students at a given grade level and dependency status. You may not originate a Direct Loan for an
amount that: Exceeds the amount requested by the borrower; In the case of a Direct Subsidized Loan, exceeds the student’s COA minus the student’s EFC and EFA; In the case of a Direct Unsubsidized Loan or Direct PLUS Loan, exceeds the student’s COA minus EFA; or In the case of a Direct Subsidized Loan or Direct Unsubsidized Loan, would cause the student to exceed the annual or aggregate
limit. See Chapter 7 of this volume for more information on packaging Direct Loans as part of a student’s financial aid award. A financial aid administrator should be aware of the responsibility incurred in originating and disbursing a loan. The school, not the U.S. Department of Education (the Department), determines the borrower’s eligibility for a Direct Loan. Schools that originate and disburse loans for ineligible borrowers, or
for loan amounts that exceed loan limits or the borrowers’ need, are subject to administrative actions such as a fine, limitation, suspension, and termination, as well as liabilities including repayment to the government of interest and costs it has paid on the ineligible loans. A school must originate a Direct Loan while the student is enrolled and eligible for the period of enrollment for which the loan is intended. A school may not originate a loan for a period in which the student is
no longer enrolled. For example, you may not originate a loan for a prior academic year that has ended, even if the student is currently enrolled and eligible for the next academic year. Similarly, if a student who was enrolled at least half time only for the fall and spring quarters of an academic year consisting of fall, winter, and spring quarters does not request a loan until the spring, you may not at that time originate a loan for the fall quarter. You may not condition the
disbursement of a loan on anything other than the eligibility criteria under the federal regulations that govern the Direct Loan Program. For example, you may not require students to participate in counseling beyond the required entrance counseling for first-time student borrowers as a condition for receiving a Direct Loan, nor may you require a student to complete a separate Direct Loan application as a condition for receiving a Direct Loan. See
Dear Colleague Letter GEN-15-16 and the Electronic Announcement posted on March 18, 2014. For Direct Loan entrance counseling
requirements, see Volume 2, Chapter 6, Providing Consumer Information. Schools that offer Direct PLUS Loans have the option of requiring parent and graduate/professional student Direct PLUS Loan applicants to complete the Direct PLUS Loan Application (formally known as the "Federal Direct PLUS Loan Request for Supplemental Information") on the Department's
StudentAid.gov website as the first step in applying for a Direct PLUS Loan. The Direct PLUS Loan Application collects the requested loan amount, the period of enrollment for which the loan is intended, and other information related to processing the requested Direct PLUS Loan. Use of the Direct PLUS Loan Application on StudentAid.gov is not required. Schools may choose to develop their own processes for obtaining the information needed
to originate Direct PLUS Loans. As noted in Volume 1, Chapter 3, the Central Processing System (CPS) does not match parent Direct PLUS Loan applicants against the National Student Loan Data System (NSLDS) to determine if the parent is in default on a Title IV loan. However, the Department conducts an NSLDS default check on all Direct PLUS Loan applicants (both students and parents) who complete the Direct PLUS Loan Application on StudentAid.gov. Schools that use the Direct
PLUS Loan Application are notified of the result of the NSLDS default check through the COD system. The result is reported as one of the following values: "N" = The borrower is not in default on any Title IV loan. "Y" = The borrower is in default on a Title IV loan. "E" = Unable to determine if the borrower is in default on a Title IV loan. If the result is "N," a parent or graduate/professional student who meets all other Direct PLUS Loan eligibility requirements may receive a Direct PLUS Loan. If the result is "Y," the parent or graduate/professional student may not receive a Direct PLUS Loan (or any other Title IV aid) until the default status is resolved. (See "Resolving Default Status" in Volume 1, Chapter 3 for more information.) A result of "E" may be reported if for some reason it was not possible to conclusively determine that the applicant is not in default (this is most commonly due to temporary systems issues involving the interface between the Direct PLUS Loan Application and NSLDS). In this case, if the Direct PLUS Loan applicant is a graduate/professional student and the CPS NSLDS match indicates that the individual is not in default, you may rely on the results of that check. If the applicant is a parent, you must separately check NSLDS to confirm that the parent is not in default before originating a Direct PLUS Loan. IMPORTANT: If you do not require Direct PLUS Loan applicants at your school to complete the Direct PLUS Loan Application, you must check NSLDS for all parent applicants to confirm that they are not in default before originating Direct PLUS Loans for these individuals (see Volume 1 for more information). On a case-by-case basis, you may refuse to originate a Direct Loan for an individual borrower, or you may originate a loan for an amount less than the borrower’s maximum eligibility. If you choose to exercise this discretion, you must ensure that your decisions are made on a case-by-case basis and do not constitute a pattern or practice that denies access to Direct Loans for borrowers because of race, sex, color, income, religion, national origin, age, or disability status. When you make a decision not to originate a loan or to reduce the amount of the loan, you must document the reasons and provide the explanation to the student in writing. Also note that your school may not have a policy of limiting Direct Loan borrowing on an across-the-board or categorical basis. For example, you may not have a policy of limiting borrowing to the amount needed to cover the school charges, or not allowing otherwise eligible students to receive the “additional” Direct Unsubsidized Loan amounts that are available under the annual loan limits. For all Direct Loans, you must document the student’s COA, EFC, and EFA in the student’s file. This information must be made available to the Department upon request. You must confirm that the borrower meets the definition of eligible borrower by doing the following:
For a Direct Subsidized/Unsubsidized Loan, you must also:
Unlike Pell Grants, it is possible for a student who is concurrently enrolled and eligible at more than one school to receive Direct Loans at each school. If the student is receiving Direct Subsidized Loans or Direct Unsubsidized Loans, the schools that the student is attending are responsible for coordinating to make sure that the total amount of the loans the student receives does not exceed the applicable annual or aggregate loan limit. In addition, the schools must ensure that there is no duplication of non-institutional costs when determining the student’s cost of attendance. (Note that in this case, which is different than the consortium arrangements discussed in Volume 2, loan funds awarded at one school are not to be included as estimated financial assistance by any other school the student is attending when determining the student’s loan eligibility for the same period.) The COD system does not set a minimum amount for which a school may originate a Direct Loan. If you can document that the student is eligible for FSA funds despite the information shown on NSLDS, you may award and disburse aid. For example, if the NSLDS Financial Aid History page of the SAR or ISIR shows that the student has a defaulted loan, but you have obtained documentation from the holder of the loan that the borrower has made satisfactory arrangements to repay the defaulted loan, you may disburse aid. You must retain all applicable documentation supporting the student's eligibility to receive FSA funds in the student's file. Only students who have financial need may receive Direct Subsidized Loans. The federal government does not charge interest on Direct Subsidized Loans while the borrower is enrolled on at least a half-time basis, during the grace and deferment periods, and during certain other periods (for example, during certain periods of repayment under certain income-driven repayment plans). If a student has received a determination of need for a Direct Subsidized Loan in an amount of $200 or less, the school may choose not to originate a Direct Subsidized Loan and may instead include that amount as part of a Direct Unsubsidized Loan. Financial need is not an eligibility requirement to receive a Direct Unsubsidized Loan. The federal government generally charges interest on Direct Unsubsidized Loans during all periods, with limited exceptions (for example, during periods of deferment for cancer treatment). If you verify that the parents of a dependent undergraduate student have refused to complete the parental information sections of the FAFSA and that they have ended financial support for the student, you may make a professional judgment decision to offer the student a Direct Unsubsidized Loan in an amount up to the applicable annual loan limit for a dependent undergraduate. For instance, under these circumstances a dependent second-year undergraduate could receive up to $6,500 in Direct Unsubsidized Loan funds. However, the student may not receive Direct Subsidized Loans or aid from any other FSA programs. Self-certification from the dependent student is not sufficient to verify that the parents have ended financial support and refuse to complete the FAFSA. In most cases, this requirement can be met by obtaining a signed and dated statement from one of the student’s parents specifically stating that the parents have stopped providing financial support to the student (including the date when the financial support stopped), will not provide financial support in the future, and refuse to complete the parental section of a FAFSA. For more information, see the “Professional Judgment” section in Chapter 5 of the Application and Verification Guide and the discussion under “Discretion of the Student Financial Aid Administrators” on page 79 of DCL GEN-08-12. Direct Subsidized and Direct Unsubsidized Loans are two components of a single loan program. A school may not choose to make only Direct Subsidized Loans or only Direct Unsubsidized Loans available to its eligible students. For more information, see DCL GEN-11-07. If your school chooses to participate in the Direct PLUS Loan Program and has both undergraduate and graduate/professional students, you must make Direct PLUS Loans available to both the parents of your dependent undergraduate students and to your graduate/professional students. You may not limit Direct PLUS Loan borrowing only to parents or only to graduate/professional students. For more details, see DCL GEN-11-07. Assuming that they meet all other Direct PLUS Loan eligibility requirements, the following individuals can borrow Direct PLUS Loans on behalf of a dependent undergraduate student:
Grandparents and other family members are not eligible to take out Direct PLUS Loans on behalf of a dependent undergraduate student unless they have legally adopted the student. In addition to the parent(s) whose resources are taken into account on a student’s FAFSA, any otherwise eligible biological or legal adoptive parent of the dependent undergraduate student can also take out a Direct PLUS Loan on the student’s behalf, even if that parent’s information is not reported on the FAFSA. Note also that more than one parent can take out a Direct PLUS Loan on behalf of the same dependent undergraduate student. For example, if a student’s biological or legal adoptive parents are divorced, they may decide to each take out a Direct PLUS Loan for an agreed upon amount (not to exceed the student’s COA, minus other EFA) to help pay for the cost of the student’s education. As explained later in this chapter, different rules apply for purposes of determining the minimum loan period for a Direct Loan and the type of academic year that a school may use to monitor Direct Loan annual loan limits depending on whether a program is term-based (with either standard or nonstandard terms) or is a non-term program (all clock-hour programs are treated as non-term programs), and in the case of a term-based program with nonstandard terms, depending on the type of nonstandard term, as described below. For detailed information on standard term, nonstandard term, and non-term programs, see Chapter 1 of this volume. Nonstandard terms may be one of the following types:
We refer to the first type as “SE9W” nonstandard terms. We group the second and third types together and refer to them as “non-SE9W” nonstandard terms. Programs with SE9W nonstandard terms are treated the same as standard-term programs for purposes of determining minimum loan period length and monitoring annual loan limits. However, programs with non-SE9W nonstandard terms are treated the same as non-term programs for these purposes. Note that substantially equal nonstandard terms (the first two types of nonstandard terms described above) are treated differently for purposes of determining Direct Loan payment periods than for determining minimum loan period length and monitoring annual loan limits. As explained in Chapter 1 of this volume, if a program is offered in standard terms or in nonstandard terms that are substantially equal in length (regardless of the length of the nonstandard term), the payment period is the term. However, for purposes of determining the minimum loan period for a Direct Loan and monitoring Direct Loan annual loan limits, substantially equal nonstandard terms that contain fewer than nine weeks are treated the same as nonstandard terms that are not substantially equal. This means that if a program has substantially equal nonstandard terms that are less than nine weeks in length, the school will make a Direct Loan disbursement each term (the same as would be the case if the program were offered in standard terms), but the minimum loan period for which the school may originate a Direct Loan and the type of academic year used to monitor Direct Loan annual loan limits must be determined in accordance with the rules that apply to non-term programs. The loan period (also referred to as the “period of enrollment”) is the period for which a Direct Loan is intended. It must coincide with an academic period established by the school for which institutional charges are generally assessed (e.g., semester, trimester, quarter, length of the student’s program, or academic year). It’s important to define the loan period at the beginning of the loan awarding process, because the timing and amount of Direct Loan disbursements are tied to the loan period. The minimum period for which a school may originate a Direct Loan varies depending on the school’s academic calendar:
The maximum period for which a school may originate a Direct Loan is generally an academic year. However, if a school applies the annual loan limit for Direct Subsidized Loans and Direct Unsubsidized Loans to a period of time greater than an academic year, the school may originate a Direct Loan for that longer period of time. For example, a school might offer an 1100 clock-hour program and define the academic year as 900 clock hours, but could choose to allow students to receive just one annual loan limit for the entire 1100-hour program. In that case, the loan period would correspond to the length of the program, a period of time that is longer than the academic year. The loan period may not include terms in which a student is ineligible. For example, if the academic year consists of the fall, winter, and spring quarters, and a student is expected to be enrolled at least half time in the fall and spring, but not enrolled in the winter, you may not originate a loan for a loan period covering the full academic year. Instead, you must originate separate loans for the fall and spring quarters. It's important for schools to accurately report academic year dates and loan period dates for all types of Direct Loans to COD. You must also update a loan’s previously reported loan period dates or academic year dates if the borrower’s actual attendance is different from the anticipated dates that were the basis for an initial reporting to COD. Some examples of when you must update loan data in COD include:
For a guide to reviewing and evaluating your procedures regarding Direct Loans, see the Direct Loans module of FSA Assessments. Direct Loan Tools for Windows is a Windows-based application designed to provide various functionalities related to all Direct Loan schools’ software. It is available for download in the Knowledge Center on the Software and Other Tools page. The Budget Control Act (BCA) put into place an automatic federal budget cut known as the sequester. For loans made under the Direct Loan program, the sequester requires an increase in the amount of the loan fee (also known as the origination fee) that is charged to borrowers. For details on the sequester-required changes to Direct Loan origination fees, see the May 19, 2022 Electronic Announcement. Direct Subsidized Loans and Direct Unsubsidized Loans have annual loan limits that vary based on the student’s grade level and (for Direct Unsubsidized Loans) dependency status, as discussed below and summarized in a chart at the end of this section. The annual loan limits are the maximum amounts that a student may receive for an academic year. The actual loan amount that a borrower is eligible to receive may be less than the annual loan limit. (There are also aggregate loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans. See “Aggregate Loan Limits” later in this chapter.) There are higher Direct Unsubsidized annual loan limits for borrowers enrolled in certain health professions programs, and special loan limits for certain students who are not enrolled in a program that leads to a degree or certificate awarded by the school they are attending. The annual loan limits for undergraduate students must be prorated (reduced) in some cases. Depending on the academic calendar of the program, a student who has reached the annual loan limit cannot receive another Direct Subsidized Loan or Direct Unsubsidized Loan until they either begin another academic year, or, in some cases, progress within an academic year to a grade level with a higher annual loan limit.
For dependent undergraduate students (excluding dependent undergraduates whose parents are unable to obtain Direct PLUS Loans), the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limits are:
These loan limits represent the total of all Direct Subsidized Loans and Direct Unsubsidized Loans a dependent undergraduate student may borrow at each level of study for a single academic year. For example, a dependent first-year undergraduate may receive up to $5,500 in Direct Subsidized Loans and/or Direct Unsubsidized Loans for a single academic year, but no more than $3,500 of this amount may be subsidized. A dependent first-year undergraduate who has no subsidized loan eligibility could receive up to the full $5,500 in Direct Unsubsidized Loans. The maximum Direct Subsidized Loan amount that an undergraduate student may receive each academic year is the same for both dependent and independent undergraduates. However, there are higher Direct Unsubsidized Loan annual loan limits for independent undergraduate students and for dependent undergraduates whose parents unable to obtain Direct PLUS Loans. For these students, the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limits are:
As with the loan limits for dependent undergraduates, these loan limits represent the total of all Direct Subsidized Loans and Direct Unsubsidized Loans that an independent undergraduate student (or a dependent undergraduate whose parent is unable to obtain a Direct PLUS Loan) may borrow at each level of study, for a single academic year. For example, an independent, first-year undergraduate may receive up to $9,500 in Direct Subsidized Loans and Direct Unsubsidized Loans for a single academic year, but no more than $3,500 of this amount may be subsidized. Although a dependent undergraduate whose parent is unable to obtain a Direct PLUS Loan has access to the same higher Direct Unsubsidized Loan annual loan limits as an independent undergraduate at the same grade level, the student is still considered to be a dependent student for all other FSA purposes. For more detail on the conditions under which a dependent undergraduate can receive increased Direct Unsubsidized Loan amounts, see “Criteria for additional Direct Unsubsidized Loans” later in this chapter. Dottie is a first-year independent undergraduate student at Russell’s Institute. Her combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit is $9,500, not more than $3,500 of which may be subsidized. Her COA is $14,500, her EFC is 2400, and she is receiving a $4,545 Pell Grant. Dottie has sufficient financial need to qualify for the maximum Direct Subsidized Loan amount of $3,500. She may also receive an additional $6,000 in Direct Unsubsidized Loan funds to fully cover her unmet need and replace part of the EFC (see Chapter 7 of this volume for information on using Direct Unsubsidized Loan funds to replace the EFC). Her total loan amount in Direct Subsidized Loans and Direct Unsubsidized Loans is $9,500. (Note that Dottie’s loan eligibility would be the same if she were a dependent undergraduate whose parent was unable to obtain a Direct PLUS Loan.) The annual loan limit for graduate or professional students is $20,500 in Direct Unsubsidized Loans per academic year. Graduate and professional students are not eligible to receive Direct Subsidized Loans. A student in an undergraduate program is not eligible for the graduate loan limit based on taking graduate coursework as a part of the undergraduate program. In contrast, a graduate student taking some undergraduate coursework is eligible for the graduate loan limit if the student is enrolled at least half time in courses (graduate or undergraduate) that can be applied to the graduate program. However, the student must already be admitted into the graduate program. A student with a bachelor’s degree who is taking preparatory work for graduate school (or whose full admission to the graduate program is contingent upon completion of certain undergraduate courses) is not eligible for graduate loan limits. See the discussion later in this chapter on annual loan limits for students taking preparatory coursework.
Note: All undergraduate annual loan limits are subject to proration. See guidance elsewhere in this chapter on increased unsubsidized loan limits for certain health professions students, and loan limits for preparatory and teacher certification coursework. There are no fixed annual or aggregate loan limits for Direct PLUS Loans. A graduate or professional student may be awarded a Direct PLUS Loan for up to the student’s COA minus other EFA (see Chapter 7 for packaging rules). Therefore, a graduate/professional student who has received the maximum Direct Unsubsidized Loan amount for an academic year may have additional Direct PLUS Loan eligibility. Similarly, the total Direct PLUS Loan amount borrowed by a parent on behalf of a dependent student may not exceed the student’s estimated COA minus other EFA the student receives for the period of enrollment. This is the only borrowing limit for Direct PLUS Loans. The “Eligibility and Certification Approval Report” (ECAR) lists “one-year” as the highest educational program offered by the school if its longest program is one academic year or longer, but less than two years in length. Students who have successfully completed the first academic year of such programs can be treated as second-year undergraduates for annual loan limit purposes, even though the ECAR lists the school’s highest program offering as “one-year.” For instance, a student enrolled in a 1,500 clock-hour program would be eligible for the second-year loan limits after completing the first 900 clock hours and 26 weeks of instructional time. However, because the remaining portion of the program would be less than a full academic year in length, the loan limit would have to be prorated, as explained later in this chapter. If a program can normally be completed in one year of full-time study, a student in that program can never receive more than the first-year annual loan limit, even if it takes the student more than one academic year to finish the program. Similarly, a student in a two-year program can never receive more than the second-year annual loan limit for an academic year. Note also that a school may not link two stand-alone one-year programs by making one a prerequisite for admission, and then classify students beginning the second one-year program as second-year undergraduates for loan limit purposes. However, hours or credits earned in a prior certificate program could be used to classify a transfer student at a grade level higher than grade level one, if the student transfers into a program that is greater than one academic year in length and the new school accepts a year’s worth of credits/hours from the prior program. For instance, if a school admits a transfer student from a certificate program and accepts 900 clock hours that the student earned toward its 1,500-hour program, the student could be eligible for the second-year loan limits if other students in the program are eligible for second-year loan limits after completing the first 900 hours of the program. In Volume 1, Chapters 1 and 6, we discussed instances in which a student may receive Direct Loans for coursework that is not part of an eligible program (preparatory coursework and teacher certification programs). The annual loan limits for students enrolled in preparatory coursework or teacher certification programs are shown in the chart below. For more detailed guidance on the eligibility of students to receive Direct Loans and other Title IV aid for teacher certification programs, see Dear Colleague Letter GEN-16-10. There are higher annual Direct Unsubsidized Loan limits for certain graduate and professional health professions students. Schools may award the increased unsubsidized amounts to students who are enrolled at least half time in certain health professions programs. The programs must be accredited by specific accrediting agencies. The increased unsubsidized amounts that an eligible health professions student may receive are in addition to the regular $20,500 Direct Unsubsidized Loan annual loan limit for graduate and professional students. The programs that are eligible for the increased Direct Unsubsidized Loan amounts and the approved accrediting agencies for these programs are shown in the chart that follows this section. As shown in the chart, the increased unsubsidized loan annual limits vary by program and academic year length. Graduate and professional students who qualify for the higher annual Direct Unsubsidized Loan limits are also eligible for a higher combined subsidized/unsubsidized aggregate loan limit. For details, see the “Aggregate Loan Limits” section later in this chapter. Note: Foreign schools that participate in the Direct Loan Program may not award the increased Direct Unsubsidized Loan amounts to health professions students. The academic year (not the award year) is used as the basis for monitoring a student’s annual loan limits. That is, a student may receive up to the applicable annual loan limit each academic year. The loan period is often the same as the academic year, though it may also be for a period shorter than the academic year (see Chapter 1 of this volume for guidance on defining the academic year). There are two types of academic years that may be used to monitor annual loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans: a Scheduled Academic Year (SAY) or a Borrower-Based Academic Year (BBAY). (Note that although there is no fixed annual loan limit for Direct PLUS Loans, Direct PLUS Loans are awarded for the same SAY or BBAY period that is used for Direct Subsidized Loans and Direct Unsubsidized Loans.) An SAY corresponds to a traditional academic year calendar that is published in a school’s catalog or other materials, and is a fixed period of time that begins and ends at the same time each year. Examples of SAYs for a standard term program are fall and spring semesters, or fall, winter, and spring quarters. If a program has SE9W nonstandard terms, an SAY could consist of two or more SE9W nonstandard terms running from fall through spring. For both standard term and SE9W nonstandard term programs, the number of credit hours and weeks of instructional time in the fall through spring SAY period must meet the regulatory requirements for an academic year. A BBAY does not have fixed beginning and ending dates. Instead, it “floats” with a student’s (or group of students’) attendance and progression in a program of study. There are three types of BBAY, described below. If a program is offered in an SAY calendar, you have the option of using either an SAY or BBAY 1 to monitor the annual loan limits for students in that program. You must use a BBAY to monitor the annual loan limits for any academic program that does not meet the definition of a program allowed to use an SAY. However, there are significant differences between the different types of BBAY:
We describe the differences between SAY, BBAY 1, BBAY 2, and BBAY 3 in more detail in the sections that follow. As noted previously, an SAY corresponds to a traditional academic year calendar, and usually begins and ends at the same time each calendar year (for example, beginning on the first day of the fall semester and ending on the last day of the spring semester). An SAY must meet the FSA requirements for an academic year (as defined in Chapter 1). An SAY may include one or more terms that a student does not attend. Standard terms are semesters, trimesters, or quarters. See Chapter 1 of this volume for more detail on standard terms. A standard-term program may use an SAY if it has a traditional academic calendar (i.e., has terms that start and end at about the same time each year, such as an academic calendar consisting of the fall and spring semesters or the fall, winter, and spring quarters). Summer terms are generally not considered to be part of the SAY, but for loan limit purposes they may be treated as a “trailer” to the preceding SAY or as a “header” to the following SAY. Your school has the option to establish a policy that designates its summer term as either a trailer or header to the SAY for all students. You can also choose to make different designations for different educational programs, or for different students, as long as you ensure that there is no overlap in academic years. Note that a fixed designation of the summer term can limit a student’s eligibility. For instance, if you always treat your summer term as a trailer to a preceding fall-spring SAY, a student who receives the full annual loan limit for fall-spring would have no remaining loan eligibility for summer. If the summer term is split into minisessions (e.g., “summer 1” and “summer 2”), the minisessions can be combined and treated as a single trailer or header, or they can be treated separately and assigned to different SAYs. If the summer minisessions are grouped together and treated as a single term, the summer COA cannot include costs for a minisession for which the student is not expected to be enrolled. The annual loan limit applies to the SAY, plus the summer trailer or header. For example, if the SAY consists of fall and spring semesters followed by a summer trailer, a student could receive a full annual loan limit for the fall-spring-summer period. Once the calendar period associated with all of the terms in the SAY and the summer header or trailer (if any) has elapsed, a student regains eligibility for a new annual loan limit. A program with SE9W nonstandard terms may use an SAY if all of the following requirements are met:
Baez Business College has programs with an academic calendar using semester hours with three 12-week quarters, offered over the fall through spring (comparable to a traditional academic year calendar) and a 10-week term offered in the summer. Baez defines its academic year as 36 weeks of instructional time and 24 semester hours. As “quarters” using semester hours, the terms are nonstandard terms. Because these terms are SE9W nonstandard terms offered in a fixed schedule with an academic calendar comparable to a traditional calendar, Baez may use an SAY (with the summer term treated as a trailer or header) or BBAY 1 (consisting of any three consecutive terms) for these programs. If a program is offered in a SAY, you have the option of using a BBAY (BBAY 1) as an alternative to the SAY for monitoring annual loan limit progression. Unlike an SAY, a BBAY is not a fixed period that begins and ends at the same time each year. Instead, a BBAY’s beginning and ending dates depend on the individual student’s enrollment. For programs with an SAY, a BBAY must include the same number of terms as the SAY that would otherwise be used (not including any summer “trailer” or “header”). For example, if the SAY includes three quarters (fall, winter, spring), a BBAY would consist of any three consecutive terms. A BBAY may include terms the student does not attend if the student could have enrolled at least half-time in those terms, but (unlike an SAY) it must begin with a term in which the student is actually enrolled (even though the student may be enrolled less than half time for the first term and not eligible for a loan for that term). Also, any minisessions (summer or otherwise) that run consecutively within a term must be combined and treated as a single term. Like an SAY, a BBAY must meet the minimum FSA requirements for an academic year. However, a BBAY that includes a summer term may include fewer than 30 weeks of instructional time or fewer credit hours than the minimum number required for an SAY. This is because a summer term may be shorter than a standard term in an SAY, but is recognized as academically equivalent to a standard term when used as one of the terms in a BBAY. (Note: This exception applies only to a BBAY used as an alternative for a program with an SAY.) You may use BBAYs for all students, only for students in certain programs, or on a student-by-student basis. For example, you could use a BBAY for students enrolled in a program that begins in a term other than the first term of the SAY. You can even alternate BBAYs and SAYs for a student, provided the academic years don’t overlap. This treatment may allow a student to receive another loan sooner than would be allowed under an SAY standard. As with an SAY, the annual loan limit applies to the BBAY. Once the calendar period associated with all of the terms in the BBAY has elapsed, a student regains eligibility for a new annual loan limit. This treatment may allow a student to receive another loan sooner than would be allowed with an SAY. For instance, if you normally use an SAY consisting of fall and spring semesters with a summer trailer, a student who received the maximum annual loan limit for fall-spring could not receive another loan until the start of a new SAY in the fall. If the student enrolls for summer and wants a loan, you could choose to switch the student to a BBAY consisting of the summer and fall terms. The student could then receive a loan for the summer term, which would be the start of a new academic year. A school that provides flexibility in academic year standards for purposes of monitoring annual loan limits must have a written policy that explains how it applies this flexibility when determining loan eligibility. If a program with standard terms or SE9W nonstandard terms is not offered in a traditional academic year calendar (SAY), BBAY 2 must be used. If the program uses semesters or trimesters, a BBAY consists of any two consecutive terms. If the program uses quarters, a BBAY consists of any three consecutive terms. If the program uses SE9W nonstandard terms, a BBAY consists of the number of consecutive terms that coincide with the weeks of instructional time in the program’s academic year. As with the optional BBAY 1 that may be used for programs with an SAY, BBAY 2 may include terms that a student does not attend (as long as the student could have enrolled at least half-time in those terms), but it must begin with a term in which the student is actually enrolled (even though the student may be enrolled less than full time for the first term and not eligible for a loan for that term). Unlike the optional BBAY 1 for programs offered in an SAY, there is no exception to the minimum academic year requirements for a BBAY 2 that includes a summer term: the BBAY 2 for standard-term programs that are not offered in a traditional academic calendar, or for SE9W nonstandard term programs not offered in a comparable academic calendar, must always include enough terms to meet the minimum Title IV academic year requirements for weeks of instructional time. The annual loan limit applies to the BBAY 2. Once the calendar period associated with all of the terms in the BBAY 2 has elapsed, a student regains eligibility for a new annual loan limit. All clock-hour programs, non-term credit-hour programs, and non-SE9W nonstandard-term programs must use a BBAY 3 that meets the minimum requirements for an academic year. That is, the BBAY must contain at least 30 (or, for clock-hour programs, 26) weeks of instructional time and at least the minimum number of credit or clock hours:
The BBAY 3 begins when a student enrolls and does not end until the later of the date the student successfully completes the hours in the academic year or the number of weeks of instructional time in the academic year. Because a student must successfully complete the minimum number of hours or weeks of instructional time in an academic year (whichever comes later) before a new BBAY 3 begins, a student’s enrollment status may affect how soon the student regains eligibility for a new annual loan limit. For example, a student who is attending part time will take longer to complete a BBAY 3 than a full-time student. (In contrast, an SAY, BBAY 1, or BBAY 2, ends when the calendar period associated with the terms in the SAY or BBAY has elapsed, regardless of how many credit hours or weeks of instruction the student completed during the SAY or BBAY.) In many clock-hour, non-term, and nonstandard-term programs, students are allowed to progress at an individual pace. For example, a school that defines its academic year as 900 clock hours and 26 weeks of instructional time offers a 900 clock-hour program that most students complete in 26 weeks. However, one student might complete 900 clock hours in 22 weeks, and another in 30 weeks. As we explain later in this chapter, the annual loan limit must be prorated (reduced) if an undergraduate student is enrolled in a program that is less than a full academic year in length, or is in a remaining period of study that is shorter than a full academic year. However, in the scenario described here you do not have to prorate the loan limit for the occasional student who completes the program in fewer than 26 weeks. This policy applies only to programs that are exactly one academic year in length. If a program is longer than an academic year, proration may be required for a loan covering the remaining portion of the program if a student completes more than the minimum number of hours during the first 26 weeks of instructional time. See loan limit proration Example 3 later in this chapter. BBAY 3 must also be used if a program has both standard terms and nonstandard terms and does not qualify to use an SAY. For example, if you offer a program with a 4-week intersession between a 15-week fall semester and a 15-week spring semester, and you do not combine the intersession with one of the standard terms but instead treat it as a standalone nonstandard term, you would be required to use BBAY 3 to monitor annual loan limit progression. In this circumstance it is not permissible to simply ignore the intersession and consider the program to be offered only in standard terms. In contrast, if you combine the intersession with one of the semesters, you could use an SAY consisting of the fall and spring semesters. The section that follows compares the SAY, BBAY 1, BBAY 2, and BBAY 3 academic year types. For convenience, the same information is presented in a side-by-side format in the "Monitoring Annual Loan Limits with an SAY or BBAY" chart.
Credit-hour programs not offered in an SAY, but with standard terms, or SE9W nonstandard terms: must use BBAY 2
Clock-hour programs, non-term programs, programs with non-SE9W nonstandard terms, and programs that mix standard and nonstandard terms and do not qualify to use an SAY: must use BBAY 3
The annual loan limit for Direct Subsidized and Unsubsidized Loans increases as a student progresses in grade level. Generally, a student’s grade level for loan limit purposes is set according to the school’s academic standards. While the law defines minimum coursework for an academic year, it doesn’t define how much coursework a student must complete to progress from one grade level to another. Unless a student’s program of study or a school’s academic standards clearly specify when this grade-level progression takes place, a reasonable approach would be to base grade levels on the number of credits required for the program, divided by the number of academic years it takes a typical student to earn that number of credits. For instance, if your school has a baccalaureate program that requires 120 semester hours of work and is typically completed in four academic years, then you might use a standard of 30 hours completed at each grade level. In standard term programs or SE9W nonstandard term programs, a student who has already received the full annual limit within an academic year can receive additional loan funds if the student progresses to a grade level with a higher annual loan limit during that same academic year. (See Volume 3, Chapter 1 for a discussion of academic year requirements.) For instance, consider a dependent student who was classified as a second-year undergraduate at the beginning of the academic year and who received a first disbursement of $3,250 in Direct Subsidized/Unsubsidized Loan funds at the beginning of the fall term of a fall-spring SAY. If the student progresses to third-year academic status at the beginning of the spring term based on the coursework completed in the fall semester, the student would now be eligible for the $7,500 Direct Subsidized/Unsubsidized annual limit that applies to third-year and beyond dependent undergraduates. If otherwise eligible, for the spring term the student could receive up to the difference between the amount already received in the fall and the new annual limit in the spring term ($7,500 minus $3,250 = $4,250). However, only the COA and EFA associated with the spring term can be used in determining the student’s eligibility for the additional loan amount in that term. The COA and EFA for the fall term cannot be considered. In contrast to standard term and SE9W nonstandard term program, progression to a higher grade level and the beginning of a new BBAY for loan limit purposes always happens at the same time for a student in a clock-hour program, non-term program, or non-SE9W nonstandard-term program. In order to advance to the next grade level for annual loan limit purposes, a student must successfully complete both the weeks and hours in the program’s Title IV academic year. That is, the student must complete at least 30 weeks of instructional time (or, for clock-hour programs, at least 26 weeks) and the number of credit or clock hours in the academic year, whichever comes later. For instance, a first-year student in a two-year non-term program with a defined academic year of 36 quarter hours and 30 weeks of instructional time who earns 36 quarter credits over 24 weeks of instructional time cannot progress to the next grade level (and begin a new BBAY for annual loan limit purposes) until another six weeks of instructional time are completed. Progression to a higher grade level does not always coincide with the beginning of a new academic year. For both standard-term programs and SE9W nonstandard term programs, if a student is enrolled at the same grade level after a full academic year has elapsed, the student may be eligible for a new annual maximum amount at the same grade level, provided that the student maintains satisfactory academic progress. For example, a student in a standard term or SE9W nonstandard term program who completes only 12 semester hours during the first SAY, BBAY 1, or BBAY 2 could receive another loan when the calendar period associated with that academic year has elapsed, but the borrower would still be classified as a first-year undergraduate at the start of the second academic year. As long as a student is maintaining satisfactory academic progress, your school is not permitted to have a general policy that limits the number of times the student can receive the maximum annual loan limit at one grade level. A school may refuse to originate a loan or may originate a loan for an amount less than the borrower’s maximum eligibility only on a case-by-case basis. Remedial coursework can be counted towards the student’s grade level progression, but only if the school’s written and officially approved academic grade level progression policy specifies that remedial coursework can be counted for this purpose. Example: A school requires that the student complete 30 semester hours to progress to second-year grade level, and specifies that up to 10 of the hours may be in the form of remedial coursework. If you’re awarding a Direct Loan to a student who is transferring from a program at another school to a program at your school that is greater than one academic year in length, you may use the loan limits for a second- year or higher undergraduate if your school classifies the student at that level based on the number of academic credits it accepts from the prior school, or based on the granting of advance standing in the new program. Note, however, that if the student already has an associate or bachelor’s degree and if that degree is required for entry into a program at your school, you mustuse the third-year and beyond undergraduate loan limits for a student who transfers to that program. For any type of educational program (whether term-based or non-term, credit-hour or clock-hour), a dependent student who has already borrowed up to the annual loan limit within an academic year may be eligible to receive additional loan funds if their dependency status changes to independent during that same academic year. The annual maximum loan amount an undergraduate student may receive must be prorated when the borrower is:
The annual loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans are prorated only in these two situations (see the later discussion under "Proration of the annual loan limit for students who graduate early from clock-hour programs" for details on a limited exception). Loan limits are not prorated based on a student’s enrollment status, such as when a student is enrolled less than full time or is enrolled for a period of less than a full academic year that is not a remaining period of study. In addition, the annual loan limit for Direct Unsubsidized Loans is not prorated for students enrolled in graduate or professional level programs. Loan proration requirements also do not apply to students taking preparatory coursework or coursework necessary for teacher certification. The annual loan limit must be prorated only when a student is enrolled in a program or remaining portion of a program that is shorter than an academic year. For purposes of awarding Title IV aid, students taking preparatory coursework or coursework needed for teacher certification are not considered to be enrolled in a program. It’s important to understand that loan limit proration determines the maximum loan amount that a student may borrow for a program or remaining balance of a program, not the loan amount that the student actually receives. In some cases, the actual loan amount that a student is eligible to receive (based on costs, EFC, and other aid) may be less than the prorated loan limit. If an academic program is shorter than a full academic year in length, you must multiply the applicable loan limit(s) by the lesser of — The result is the prorated annual loan limit for that program. (You may express these fractions as decimals to see more easily which is less or to calculate the prorated limit. For more information, see "Use of fractions vs. decimals when prorating loan limits" later in this chapter.) You must also prorate loan limits for students enrolled in remaining periods of study shorter than an academic year. This circumstance can occur when a student is enrolled in a program that is one academic year or more in length, but the remaining period of study needed to complete the program (also sometimes called a “final” period of study) will be shorter than an academic year. Proration is required only when you know in advance that a student will be enrolled for a final period of study that is shorter than an academic year. If a student originally enrolls for a final period of study that is a full academic year in length, but completes the program early in less than a full academic year, you're not required to retroactively prorate the annual loan limit (but see the discussion under "Proration of the annual loan limit for students who graduate early from clock-hour programs" later in this chapter for a limited exception to this general rule). In a standard-term program, or a credit-hour program using SE9W nonstandard terms, a remaining period of study is considered shorter than an academic year if the remaining period contains fewer terms than the number of terms covered by the school’s Title IV academic year. For programs that are offered in an SAY, the number of terms covered in the school’s Title IV academic year usually does not include a summer “header” or “trailer” term. For standard-term programs or credit-hour programs with SE9W nonstandard terms, the length of the loan period does not determine whether a student is enrolled in a remaining period of study that is shorter than an academic year. The determining factor is the length of the remaining period of study in which the student is enrolled, which may not be the same as the loan period. For example, if an undergraduate student is enrolled for a full SAY consisting of fall and spring semesters, and will complete the program at the end of the spring term, but is enrolled less than half time during the spring, the student is eligible to receive a Direct Loan only for the fall semester. Although the loan period (fall only) would be shorter than an academic year, the remaining period of study (fall through spring) is a full academic year. Therefore, if the student receives a Direct Loan in the fall, proration of the annual loan limit is not required. In a clock-hour program, non-term program, or a program with non-SE9W nonstandard terms, a remaining period of study is considered less than an academic year if it consists of fewer clock or credit hours than the program’s defined Title IV academic year. In contrast to standard term and SE9W nonstandard term programs, if a student enrolled in a clock-hour, non-term, or non-SE9W nonstandard term program is in a remaining period of study shorter than an academic year and receives a Direct Loan, the loan period and the remaining period of study will always be the same. This is because for these programs the minimum loan period is the lesser of the length of the program (or remaining portion of a program) or the academic year. For all types of programs, where there is a remaining period of study less than an academic year, the annual loan limit for the student’s grade level is multiplied by the following fraction to determine the prorated loan limit: Unlike proration for programs that are shorter than an academic year, there is no comparison of weeks and hours. Only the credit or clock hours that the student is scheduled to attend or is actually attending at the time of origination are used in the calculation. As explained earlier in this chapter, for undergraduate students there is a maximum combined annual loan limit for Direct Subsidized Loans and Direct Unsubsidized Loans, and a maximum portion of that combined annual loan limit that a student may receive in Direct Subsidized Loans. If the annual loan limit for an undergraduate student must be prorated, you must first determine the combined Direct Subsidized Loan and Direct Unsubsidized Loan prorated annual loan limit, and then separately determine the Direct Subsidized Loan prorated annual loan limit. This is illustrated in the proration examples that follow. A student who is enrolled in a four-year program that is offered in an SAY consisting of three quarters plus a summer “trailer” has completed four academic years of study. However, the student needs to attend an additional quarter term to complete the program requirements. The final quarter term would fall in a new academic year, and thus the annual loan limit would have to be prorated, because the remaining period of study (a single quarter) is less than a full academic year. A student who is enrolled in a two-year program not offered in an SAY where the Title IV academic year covers two 15-week semesters has completed two academic years of study, but needs to return for an additional semester to complete the program requirements. Again, the loan limit would have to be prorated if the student receives a loan for the final semester. It is acceptable to convert the fraction to a decimal and then multiply the annual loan limit by the decimal, but this conversion is not a requirement. Although in the following examples the fractions are converted to decimals, you may choose to multiply the annual loan limit by the original fraction. However, you should be consistent in the method you use, since the fraction and decimal calculations sometimes result in slightly different prorated loan limits. For instance, using the decimal 0.44 in Example 1 below results in a prorated loan limit of $2,420. In contrast, using the fraction 400/900 would result in a slightly higher prorated loan limit of $2,444. In Example 2, using the decimal 0.67 results in a prorated loan limit of $6,365. Using the fraction 24/36 would result in a slightly lower prorated loan limit of $6,333. A school may choose to define its academic year as longer in weeks or hours than the minimum statutory requirements. If so, the school’s standard – not the statutory minimum – determines whether a program or a final period of study is shorter than an academic year. The annual loan limits are based on an academic year. If a student who received a Direct Loan transfers from one school to another school or changes to a different program at the same school and there is an overlap between the academic year associated with the loan received for the first school or program and the academic year for the new school or program, this overlap may affect the amount that the student is initially eligible to borrow at the new school or for the new program. An overlap in academic years exists if the academic year at the new school (or the academic year for the new program at the same school) begins before the calendar end date of the academic year at the prior school or program. In the case of a transfer student from another school, you may obtain documentation from the prior school of the specific beginning and ending dates for the prior academic year or look for the academic year dates of Direct Loans originated by the prior school on the “award detail information page” in the Common Origination and Disbursement (COD) Web interface. If a student enrolls in a program with standard terms or SE9W nonstandard terms after already having taken out a loan at another school with an overlapping academic year, the student initially may not receive more than the annual loan limit at the new school minus the amount received at the prior school. However, the student may borrow again for a subsequent term within the same academic year at the new school if the term begins after the end of the academic year at the prior school. For a subsequent term that begins after the end of the prior school’s academic year, but within the initial academic year at the new school, the student may borrow up to the difference between the applicable annual loan limit and the amount already received for the new school’s academic year, if the student’s COA supports that amount. Likewise, if a student transfers to a different program at the same school at the beginning of a new term within the same academic year, the student’s loan eligibility for the remaining term(s) of the academic year is equal to the difference between the applicable loan limit for the new program and the loan amount the student received for the prior program within the same academic year. If a student enrolls in a clock-hour, non-term, or non-SE9W nonstandard term program after already having taken out a loan at another school for an academic year that overlaps the academic year at the second school, the student is restricted to the remaining balance of the student’s annual loan limit (that is, the difference between the applicable annual loan limit at the new school and the loan amount received for the overlapping academic year period at the prior school) until the ending date of the academic year reported by the prior school. Although the minimum loan period in a clock-hour, non-term, or non- SE9W nonstandard term program is normally the lesser of the academic year or the length of the program (or remaining portion of the program), in this circumstance the new school may originate an initial loan for an “abbreviated loan period” equal to the remaining portion of the academic year that began at the prior school. For more detailed information, see the discussion under “Loan periods when a student transfers to a new school or new program with an overlapping academic year” later in this chapter. If certain requirements are met, when a student who has received a Direct Loan for one program transfers to a different program at the same school, you have the option of considering the student to remain in the same payment period and loan period. Otherwise, you must place the student in a new payment period and originate a new loan with a new loan period. At your option, you can consider a student who transfers from one program to another program at the same school to be in the same payment period and loan period if:
If you choose to keep the student in the same payment period, the loan period for the loan the student received for the first program would also remain the same. However, you must take into account any changes as to when the student is expected to complete the hours and weeks of instructional time of the academic year and make any necessary adjustments to the ending date of the loan period or the dates of the second and any subsequent disbursements. If the requirements described above are not met, or if they are met but you choose to place a student who transfers from one program to a different program in a new payment period, you must perform a Return of Title IV calculation for the student’s withdrawal from the payment period in the first program (assuming that the student did not complete that payment period without starting a new one before transferring into the new program if the return of Title IV funds is done on a payment period basis, or assuming the student did not complete the loan period if the R2T4 is done on a period of enrollment basis). That calculation would close out the original loan period. Then the student would start over with a new loan period for his new program that uses the remaining annual loan limit eligibility from the academic year associated with the first program (see below for more detailed information). If a student transfers from one program at your school to a different program at your school within the same academic year and is not considered to remain in the same payment period and loan period (regardless of whether the student completed the first program or is changing to a different program without having completed the first program), you may originate an initial loan for the new program with an abbreviated loan period that ends on the calendar period ending date of the academic year associated with the prior program. The abbreviated loan period described above is an exception to the normal rule that for a clock-hour, non-term credit hour, or non-SE9W program, the minimum period for which a school may originate a loan is the lesser of the academic year or the length of the program (or remaining portion of the program). For the abbreviated loan period, the student may receive up to the difference between the applicable annual loan limit for the new program and the loan amount that the student received for the prior program during the same academic year. For more detailed information, see the discussion under “Loan periods when a student transfers to a new school or new program with an overlapping academic year” later in this chapter. A borrower who has reached the aggregate borrowing limit for Direct Subsidized Loans and Direct Unsubsidized Loans may not receive additional loans. Once the loans are repaid, in full or in part, the borrower may apply for additional loans. To ensure that a student doesn’t exceed the aggregate loan limits, the student’s FAFSA data is matched with NSLDS, and if the student has exceeded or is approaching the aggregate loan limits, this will be noted in the ISIR. If a student transfers to your school, you must inform NSLDS so that it can begin the Transfer Student Monitoring process. The maximum outstanding total subsidized and unsubsidized loan debt, excluding capitalized interest, is:
The loan amounts counted towards these maximums include any outstanding Direct Subsidized Loan and Direct Unsubsidized Loan amounts, and also any outstanding Subsidized and Unsubsidized Federal Stafford Loans previously borrowed under the Federal Family Education Loan (FFEL) Program. In the case of a Direct Consolidation Loan or a Federal Consolidation Loan made under the FFEL Program, the outstanding amount of the consolidation loan representing any Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, or Unsubsidized Federal Stafford Loans that were paid off by the consolidation loan is counted toward the aggregate subsidized and unsubsidized loan limits. (NOTE: No new loans have been made under the FFEL Program since June 30, 2010.) Students receiving Direct Loans for teacher certification coursework or for preparatory coursework (including preparatory coursework required for admission to a graduate or professional program) are considered to be undergraduates for all Title IV purposes. Therefore, Direct Subsidized Loans and Direct Unsubsidized Loans that a student receives for teacher certification coursework or preparatory coursework are counted against the student's undergraduate aggregate loan limits. (For guidance on Direct Loan eligibility for teacher certification and preparatory coursework, see the "Annual Loan Limits" section earlier in this chapter.) As explained earlier in this chapter, graduate and professional students who are enrolled in certain health professions programs are eligible for higher annual Direct Unsubsidized Loan limits. These students also have a higher combined subsidized/unsubsidized aggregate loan limit. The combined subsidized/unsubsidized aggregate loan limit for graduate and professional health professions students who are eligible to receive the increased annual unsubsidized amounts is $224,000. Not more than $65,500 of this amount may be from subsidized loans. The subsidized component of the aggregate limit includes subsidized loans that students may have received for graduate/professional study prior to July 1, 2012 (when graduate and professional students were still eligible to receive subsidized loans) and/or for undergraduate study. If a student who received increased Direct Unsubsidized Loan amounts for a qualifying health profession program later enrolls in a non-health professions program, the student is no longer eligible for the increased Direct Unsubsidized Loan limits. However, the additional loan amounts received for the health professions program are not counted toward the normal aggregate loan limit for that student. Before originating a Direct Subsidized Loan or Direct Unsubsidized Loan, it’s important to make sure the student still has remaining eligibility under the aggregate loan limits. As long as there is no conflicting information, you may rely on the financial aid history (provided on the ISIR as well as in NSLDS) and the Transfer Student Monitoring process to tell you if a student is about to exceed the aggregate loan limits. (The NSLDS financial aid history may affect eligibility for other FSA programs, so it is discussed in more detail in Volume 1, Chapter 3.) The Loan History shown in NSLDS for a borrower who has received Title IV loans shows Aggregate Loan Information for the borrower’s outstanding subsidized and unsubsidized loans. The Aggregate Loan Information subsidized and unsubsidized Outstanding Principal Balance amounts shown in a borrower’s NSLDS loan history do not include unpaid accrued interest, capitalized interest (unpaid interest that has been added to the principal balance of the loan), or other charges, as these amounts are not counted against the aggregate loan limits. For each individual loan that a borrower has received, NSLDS shows both the outstanding principal balance (OPB) and the aggregate outstanding principal balance (Agg. OPB). The OPB is what the borrower owes, which may include capitalized interest and other charges. The Agg. OPB is the portion of the OPB that counts against the aggregate loan limits for subsidized and unsubsidized loans. For instance, suppose a student has a Direct Unsubsidized Loan disbursed in the amount of $5,000. Over time, $200 in interest accrues and is capitalized. Assuming that the borrower has made no payments on the loan, the OPB on the loan will be $5,200 (this is the amount the borrower owes), and the Agg. OPB will be $5,000 (this is the amount that is counted against the aggregate loan limit). If you are looking at the individual loans as displayed in the student’s NSLDS Loan Detail, it is the Agg. OPB that you should use to determine remaining loan eligibility under the aggregate loan limits. The Aggregate Loan Information subsidized and unsubsidized Outstanding Principal Balance amounts shown in a borrower’s NSLDS loan history also include the outstanding portion of consolidation loans (both Direct Consolidation Loans and Federal Consolidation Loans made under the FFEL program) attributable to Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans that were repaid by the consolidation loan. NSLDS may also show a “Consolidation Loans, Unallocated” amount that is not counted against a borrower’s aggregate loan limits. The “Consolidation Loans, Unallocated” amount represents the portion of a consolidation loan that cannot be attributed to other loans in the borrower’s loan history (for example, it may represent capitalized interest or non-Title IV loans that were consolidated). You are not responsible for determining the origin of any unallocated consolidation loan amounts. A consolidated Perkins Loan or PLUS loan becomes part of the unsubsidized portion of a consolidation loan, but it is not counted toward the borrower’s aggregate Direct Loan limits. In some cases, a student may qualify for higher loan limits, but then lose eligibility for the higher limits due to a change in status. One such situation is when a dependent undergraduate qualifies for increased Direct Unsubsidized Loan amounts because the student’s parent is unable to obtain a Direct PLUS Loan, but in a subsequent academic year the student’s parent is able to qualify for a Direct PLUS Loan. The dependent student then loses eligibility to receive Direct Unsubsidized Loans at the higher independent undergraduate annual and aggregate loan limits, and is once again subject to the dependent undergraduate annual and aggregate loan limits. However, the increased unsubsidized loan amounts that the student previously received as a result of the parent’s inability to obtain a Direct PLUS Loan are not counted against the dependent undergraduate aggregate loan limit (see the example that follows). A similar situation occurs when a student who received loans for a graduate or professional degree program later returns to school and enrolls in an undergraduate program. In this case, loan amounts that the student received as a graduate or professional student are not counted against the undergraduate aggregate loan limit. For more detailed information and an example, see the discussion under “Undergraduate student with graduate degree” earlier in this chapter. Before July 1, 2021, first-time borrowers on or after July 1, 2013 (borrowers who had no principal or interest balance on any Direct Loan or FFEL Program loan on the date they received a Direct Loan on or after July 1, 2013) were subject to a limit on the maximum period of time for which they could receive Direct Subsidized Loans. Specifically, these borrowers could not receive Direct Subsidized Loans for a period exceeding 150% of the published length of their academic program. Borrowers who met or exceeded the 150% limit were also subject to a loss of the interest subsidy on their Direct Subsidized Loans (that is, they became responsible for paying interest on Direct Subsidized Loans during in-school periods, deferment periods, and other periods when, under normal rules, no interest would be charged on Direct Subsidized Loans). This previous limitation on subsidized loan eligibility is often informally referred to as the “150% rule” or “SULA” (SULA = Subsidized Usage Limit Applies). The FAFSA Simplification Act, part of the Consolidated Appropriations Act, 2021, repealed the SULA requirements, effective for Direct Subsidized Loans first disbursed on or after July 1, 2021. As a result, there is no longer a time limitation on any borrower's eligibility to receive Direct Subsidized Loans. In addition, the Department has reinstated the interest subsidy on all Direct Subsidized Loans with a balance greater than zero that had previously lost this benefit due to the SULA provisions. For additional information on how the Department implemented the repeal of the SULA requirements, refer to the June 11, 2021 Electronic Announcement posted in the Knowledge Center. Detailed information on the SULA requirements that were in effect before July 1, 2021 can be found in Volume 3, Chapter 5 of the 2020-21 Federal Student Aid Handbook. If a program is offered in modules, this does not change the minimum loan period rules for Direct Loans. For example, if a standard or SE9W nonstandard term is divided into two or more modules, the minimum loan period for a Direct Loan is still the term, even if the student does not attend all of the modules within the term. Similarly, if a clock-hour, non-term credit-hour, or non-SE9W nonstandard term program is offered in modules, the minimum loan period is still the lesser of the academic year or the program length (or remaining portion of the program). For Title IV aid purposes, students are allowed to skip one or more modules. However, if a loan period includes modules that the student does not attend, the COA for the loan period may not include costs associated with those modules. A change in enrollment status to less-than-half-time as a result of a student’s failure to begin attendance in all scheduled classes would not affect the student’s eligibility for any Direct Loan funds previously disbursed because at the time the previous disbursements were made, the student was still scheduled to attend on at least a half-time basis. However, a student who is no longer enrolled at least half time may not receive as a late disbursement any second or subsequent disbursement of the loan. If a student does not withdraw, but ceases to be enrolled on at least a half-time basis, the regulations at 34 CFR 668.164(j)(3)(iii) allow a school to make a late disbursement of a Direct Loan for costs incurred by the student for a period in which the student was eligible. However, this does not apply if the student dropped all future classes or modules because the student never really began classes as a half-time student. Title IV program funds (including Direct Loans) are disbursed to a student on the presumption that the student will attend the hours for which aid has been awarded. Therefore, a school is not required to delay the disbursement of a Direct Loan until a student has begun attendance in enough hours to establish half-time enrollment status. However, if a school has not yet made a Direct Loan disbursement to a student who has dropped classes, and the school determines that the student never began attendance in enough classes to establish half-time enrollment status, the school may not make a first disbursement of a Direct Loan to that student. Likewise, if a student who was enrolled in a series of modules dropped all future classes before beginning attendance in enough modules to establish half-time enrollment status, the school may not make a first disbursement of a Direct Loan because the school knows the student never began attendance on at least a half-time basis. If a student who dropped to less-than-half-time status resumes enrollment on a half-time basis during the payment period or period of enrollment, the school may make remaining disbursements of a Direct Loan if the school documents (1) the student’s revised COA, and (2) that the student continues to qualify for the entire amount of the loan, despite any reduction in the student’s cost of attendance caused by the student’s temporary cessation of enrollment on at least a half-time basis. A student who has inadvertently received Direct Loan funds in excess of the annual or aggregate loan limits is ineligible to receive any FSA funds until the overborrowing is resolved. The student can regain eligibility for aid by repaying the amount that exceeded the annual or aggregate loan limits, or by making satisfactory arrangements with the loan servicer to repay the excess amount. The loan servicer will allow a borrower to “reaffirm” that they will repay the excess according to the terms of the promissory note that they signed. The school where the student is requesting additional FSA funds is responsible for identifying the loan(s) that resulted in the overborrowing, discussing the overborrowing with the student, and resolving any discrepancies in the information that is obtained. If the loan(s) that caused the student to exceed the annual or aggregate loan limit were received for attendance at a different school, in some cases it may be necessary for the school the student is currently attending to contact the other school for additional information needed to determine that the excess borrowing was inadvertent. Overborrowing is not considered inadvertent if there is any evidence that the overborrowing was the result of deliberate action on the part of the school that determined the borrower’s eligibility for the loan, or on the part of the borrower who received the loan. If you determine that the overborrowing was the result of deliberate action on the part of another school or the borrower, you must notify FSA’s School Participation Division and provide evidence. Once you have documented that the student has either repaid the excess loan amount or has made satisfactory arrangements with the loan holder to repay the excess amount, you may award additional aid. However, the student may or may not be eligible to receive additional loan funds, depending on the circumstances. For example, a dependent undergraduate who inadvertently exceeded the $23,000 (subsidized) aggregate limit could not receive any additional Direct Subsidized Loan funds as a dependent undergraduate unless the outstanding debt was paid down below the $23,000 limit. However, the student could potentially receive additional Direct Unsubsidized Loan funds, up to the $31,000 aggregate loan limit, or non-loan aid. An independent undergraduate who inadvertently exceeded the $23,000 subsidized limit (but who has not reached the $57,500 combined aggregate loan limit for independent undergraduates) could borrow additional Direct Unsubsidized Loan funds once they make satisfactory arrangements to repay the subsidized amount that exceeds $23,000. For more on overborrowing and overawards, see Volume 4. The effective date when a student regains eligibility for the Pell Grant, Campus-Based, TEACH Grant, and Iraq and Afghanistan Service Grant programs begins with the payment period in which the overborrowing was resolved. For Direct Loans, eligibility is retroactive to the beginning of the academic year in which the overborrowing was resolved. If a borrower who inadvertently received more than the annual or aggregate loan limits has consolidated the loan(s) that caused the borrower to exceed the loan limit, the consolidation loan is considered to be a satisfactory arrangement to repay the excess amount that restores the borrower’s eligibility for FSA aid. (Note, however, that consolidation of an amount that exceeded the aggregate Direct Subsidized/Unsubsidized Loan limits does not automatically make a student eligible for additional Direct Loan funds.) If you discover that, due to an error, a student borrower has received Direct Subsidized Loan funds in excess of their financial need, and the student is still enrolled for the loan period, you must return the subsidized loan amount for which the borrower was ineligible and ask the borrower if they wish to replace it with a Direct Unsubsidized Loan. If the student agrees to accept the unsubsidized loan funds and the borrower also received a Direct Unsubsidized Loan for the same loan period as the Direct Subsidized Loan, you may increase the amount of the Direct Unsubsidized Loan disbursements by the amount of the Direct Subsidized Loan that the borrower was ineligible to receive. If the student did not receive a Direct Unsubsidized Loan, you may originate a new Direct Unsubsidized Loan for the amount of the Direct Subsidized Loan that the student was ineligible to receive. The new Direct Unsubsidized Loan should have the same loan period and disbursement dates as the Direct Subsidized Loan. If the borrower does not agree to have the excess subsidized loan funds replaced by a Direct Unsubsidized Loan, you must still return the ineligible Direct Subsidized Loan amount. If you discover that a student received Direct Subsidized Loan funds in excess of financial need after the student is no longer enrolled for the loan period, you are not required to take any action to eliminate the excess subsidized loan amount. If you discover that, due to an error, a student borrower who was eligible for a Direct Subsidized Loan instead received a Direct Unsubsidized Loan, you must correct the error (even if the loan period has ended) by submitting a downward adjustment to reduce or eliminate the Direct Unsubsidized Loan, as appropriate, and replacing it with the same amount of Direct Subsidized Loan funds. You may do this either by adjusting an existing Direct Subsidized Loan upwards, or, if the borrower does not have an existing Direct Subsidized Loan, by originating a new Direct Subsidized Loan. Replacing a Direct Unsubsidized Loan with a Direct Subsidized Loan in this circumstance does not require obtaining the borrower’s consent. Last Modified: 07/15/2022 • Published: 03/28/2021 |
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