U.S. Department of Education March 27, 2014 NMASFAA Conference

1. The New 150% Limit on Subsidized Direct Loans - How it Affects Both Your School and Your Students U.S. Department of Education March 27, 2014 NMASFAA Conference

2. Kevin CampbellTraining Officer Region VI214-661-9488kevin.campbell@ed.govA copy of this presentation is on www.NMASFAA.orgPlease complete ED’s survey regarding this presentation: https://s.zoomerang.com/s/KevinCampbell-TX

3. Laws and Regulations 3

4. Higher Education Act of 1965 has been Amended Resulting from the Moving Ahead for Progress in the 21st Century Act (MAP-21) • 150% Direct Subsidized Loan Limit – Interim Final Rule • Published May 16, 2013 • Comment Period Ended on July 1, 2013 • Revised Final Rule published on January 16 • Electronic Announcement Posted on January 17

5. MAP-21 • Limits the length of time a student borrower may enjoy the subsidy on a Direct Loan • Intent is to encourage students to progress through their academic programs in a timely manner • Intent is to save money

6. Helpful Definitions and Terms 6

7. Subsidized Direct Loan • DL that ED pays, or subsidizes, the interest while the borrower is in school at least half time • Also for certain other statuses • Borrower must have need to qualify • COA-EFC=Need • The subsidized interest is a benefit to the borrower and does not get repaid • Unsubsidized DL – ED does not pay the interest • Either paid by borrower while in school or capitalized into the loan itself and is paid by borrower in repayment

8. SULA • Subsidized Usage Limit Applies • Used to describe applicable loans and borrowers

9. Definition of Academic Year • Title IV Academic Year • The AY defined for Title IV purposes • Minimum of 900 clock hours AND 26 weeks of instruction • Minimum of 24 semester/36 quarter credit hours and 30 weeks of instruction • AY Used to determine DL annual loan limits • Borrower Based Academic Year (BBAY) • Scheduled Academic Year (SAY) • SULA usually uses the second definition • One exception

10. First-Time Borrower and Consequences 10

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

12. Consequence 1: Eligibility Loss Borrower loses eligibility for additional Direct Subsidized Loans when borrower has received Direct Subsidized Loans for 150% of their current academic program If eligibility is lost, borrower still eligible for Direct Unsubsidized Loans Generally measured in time, not dollars.

13. Consequence 2: Interest Subsidy Loss Based on enrollment in any program, not borrowing or requesting aid

14. First Consequence: Loss of Eligibility for Further Subsidized Direct Loans 14

15. Determining When Eligibility is Lost Let’s examine the formula used for SULA: 150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less).

16. Maximum Eligibility Period 150% limit is met (eligibility is lost) when remaining eligibility period is zero (or less).

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

18. Converting Months/Weeks To Years • This is the exception where the definedTitle IV AY is used

19. Subsidized Usage Period 150% limit is met (eligibility is lost) when remaining eligibility period is zero (or less).

20. Subsidized Usage Period • A Subsidized Usage Period is the period of time for which a borrower receives a Direct Subsidized Loan • Calculated loan-by-loan • Measured in academic years or portions • Rounded, up or down, to nearest tenth of a year* • Includes only periods when Direct Subsidized Loan received • ED will calculate using school-reported information * *changed from IFR

21. Calculating Subsidized Usage Period

22. Example 1: Usage-Credit Hour Program is semester-based. Scheduled academic year includes the fall and spring semesters. Student receives one term loan for fall semester only. Subsidized Usage Period = 117/264 = .44 Years Rounded to .4 Years

23. Example 2: Usage-Clock Hour Program is 600 clock hours and 20 weeks of instruction. Scheduled academic year is 900 clock hours and 26 weeks of instruction. Student receives a subsidized DL for the program. Subsidized Usage Period = 140/182 = .76 Years Rounded to .8 Years

24. Enrollment Status Exception • Calculated subsidized usage period is prorated by enrollment status • Proration occurs before rounding • Clock hour and Non-term credit hour students are all considered to be full time for this purpose

25. Annual Loan Limit Exception Only circumstance where dollars are considered is when a student receives a Direct Subsidized Loan in the amount of the annual loan limit Can only occur for standard-term programs or for non-standard-term programs that are substantially equal and are each at least nine weeks in length

26. Loan Period & Academic Year • Determines the Subsidized Usage Period • Covered in DCL GEN-13-13, applies to all Direct Loans • Loan Period – period of enrollment for which borrower received loan • Must be updated if student’s actual enrollment or eligibility doesn’t match originally reported loan period

27. Loan Period & Academic Year • Academic year – period to which the annual loan limit applies • For credit-hour programs that use standard terms or non-standard SE9W terms, corresponds to calendar period of terms in SAY or BBAY • For clock-hour programs or credit-hour programs that use non-standard NSE9W terms or do not use terms, corresponds to period of time required for borrower to complete a Title IV academic year’s worth of coursework (BBAY3)

28. Updating Loan Periods • Student does not enroll for a payment period covered by the originally reported loan period • Student withdraws from a payment period and all loan funds associated with the payment period are returned (R2T4) • Student cancels all of a disbursement of a loan that is attributable to a payment period

29. Updating Loan Periods - Continued • Student is not otherwise eligible for a loan for a payment period covered by the loan period • The student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled *This is a non-exhaustive list

30. Updating Academic Years • If you have terms and use a scheduled academic year (SAY) and • Student is attending a program for which summer is not a “required” term, and • Attends summer, and • Receives a loan for summer • Academic year must be updated to include the summer

31. Updating Academic Years • Student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled • Academic year must be updated to reflect the increased time it is taking

32. Concept is based on 1:1 Ratio • Loan Period is one academic year • AY is one academic year • Student receives both disbursements (Fall & Spring) • Student has used one year’s eligibility for subsidized DL • 1:1 ratio • If student only received one disbursement AND it was less than the full years annual loan limit • Student has used ½ of one year’s eligibility for subsidized DL • ½:1 ratio

33. Scope of Guidance • Applies to all Direct Loans first disbursed on or after July 1, 2013 • Applies to all Direct Loan types • Applies to all students • Applies to all eligible programs and coursework • ED will monitor compliance with loan period and academic year date reporting

34. Determining When Limit Is Met 150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less).

35. Remaining Eligibility Period How much eligibility a borrower has left under the 150% limit. • Accounts for Direct Subsidized Loans received for all enrollment in all programs (except teacher certification programs) • Eligibility for subsidy is lost when remaining eligibility is zero or less • ED will calculate using school-reported information

36. Example 3: Remaining Eligibility Student receives 5 full years of Direct Subsidized Loans while enrolled in a 4-year program.

37. Example 4: Remaining Eligibility Student receives 3 years of Direct Subsidized Loans while enrolled in a 2 year program. Student then transfers to a 4 year program.

38. Example 5: Remaining Eligibility Student receives 1 year of Direct Subsidized Loans while enrolled in a 2-year program. Student transfers to a 1-year clock-hour program. Minimum loan period length in a clock-hour program is lesser of length of program or academic year. School cannot disburse a Direct Subsidized Loan to this student.

39. Second Consequence:Loss of Interest Subsidy on Subsidized Loans Student Already Owns 39

40. Loss of Interest Subsidy Benefits Subsidy loss is effective on the date of the triggering enrollment

41. Enrollment Types: Subsidy Loss

42. Periods of Interest Subsidy Borrower with interest subsidy: Borrower who lost interest subsidy:

43. Which interest is the borrower’s? Subsidy loss is not retroactive to the date of disbursement or from the date of the loss of eligibility. Loss of subsidy is from the date of the enrollment that caused the loss of subsidy

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

45. Example 7: Subsidy Loss Student is enrolled in a 2 year program and received 3 years of Subsidized Loans. Student enrolls for one more semester in the same program, and then transfers to a 4-year program. • Student regains eligibility for Subsidized Loans upon transfer. • Any new Subsidized Loans will have interest subsidy. • Prior Subsidized Loans that lost subsidy do not regain subsidy.

46. Example 8: Subsidy Loss Student received 5 years of Subsidized Loans while enrolled in a 4-year program. Student completes the program and then enrolls in a 2-year program

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

48. DL – Lost Subsidy • Subsidized DL that has lost subsidy is still considered a subsidized loan • Does not become an unsubsidized loan • Important for calculating aggregate DL limits

49. Special Provisions 49

50. Preparatory Coursework • Preparatory coursework needed for enrollment in an undergraduate or certificate program • Up to $2,625 in Subsidized DL for one consecutive 12-month period • Preparatory coursework needed for enrollment in a graduate/professional degree or certificate program • Up to $5,500 in Subsidized DL for one consecutive 12-month period