national association of student financial aid administrators the following is a presentation...
TRANSCRIPT
National Association of Student Financial Aid Administrators
The following is a presentation prepared for: VASFAA
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150% DirectSubsidized Loan Limit
Karen McCarthyDivision of Policy and Federal Relations
© 2013 NASFAA 3
Today’s Agenda
• Background and overview
• Who does what?
• Limit on subsidized loan eligibility
• Loss of interest subsidy
• Preparatory and teacher certification coursework
• School reporting requirements
• Loan counseling
• Questions?
© 2013 NASFAA 4
Background: How Did We Get Here?
Moving Ahead for Progress in the 21st Century Act (MAP-21)
• Enacted July 6, 2012
• Extended the 3.4% interest rate for subsidized loans until July 1, 2013
• Established a time limit for subsidized loan eligibility for new borrowers on or after July 1, 2013
• Waived master calendar and negotiated rulemaking requirements
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Background: How Did We Get Here?
Interim Final Rules
• Published May 16, 2013
• Effective immediately
• Comment period until July 1, 2013
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Who Does What?
CPS• Inform school of first-time borrower
and progress
• Inform first-time borrowers that there’s a limit
COD• Determine who is first-time
borrower
• Do eligibility calculations
• Reject loans for ineligible borrowers
• Inform schools
NSLDS• Determine eligibility for interest
subsidy
Loan Servicers• Communicate with borrower when
responsible for accruing interest
• Stop interest subsidy
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Who Does What?
School Responsibilities
• Reporting, reporting, and more reporting to NSLDS and COD
• Updating your loan counseling, if you don’t use ED-provided counseling
• Updating loan periods and loan’s academic year in COD when required
• Most challenging: explaining this to students when they have questions!
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First-Time Borrowers
• Definition: has no outstanding balance on a FFEL or Direct Loan when receiving a new Direct Loan on or after July 1, 2013
• Example 1: student who has never borrowed before and receives a Direct Loan on or after 7/1/13
• Example 2: student with outstanding balance on DL pays off balance on or after 7/1/13, and later receives a new DL
• Only first-time borrowers are subject to 150% rules
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Loss of Subsidized Loan Eligibility
• Borrower loses subsidized loan eligibility when he or she receives subsidized loans for a period exceeding 150% of the published length of the borrower’s current educational program
• Length of time the student borrows subsidized loan is key, not the amount of the loan
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Loss of Subsidized Loan Eligibility
Maximum eligibility period
– All subsidized usage periods
= Remaining eligibility period
• Student loses subsidized eligibility when remaining eligibility period is zero or less
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Maximum Eligibility Period
150% of the published length of the borrower’s current educational program
• Program should already have a published length
• Varies by program
• ED calculates by multiplying published length (reported by school) by 1.5
• Measured in academic years (ED will convert if published length is in months or weeks)
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Maximum Eligibility Period - Examples
Program LengthMaximum
Eligibility Period
2-year associate’s degree 3 years
2-year certificate 3 years
1-year certificate 1.5 years
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Loss of Subsidized Loan Eligibility
Maximum eligibility period
– All subsidized usage periods
= Remaining eligibility period
• Student loses subsidized eligibility when remaining eligibility period is zero or less
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Subsidized Usage Period
Period of time for which the borrower receives a subsidized loan
• Measured in loan academic years (corresponding to period covered by loan limit)
• Calculated loan by loan
• Rounded down to nearest quarter of a year
• Calculated by ED
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Subsidized Usage Period
Days in loan period
Days in loan’s academic year
• Loan period: period of enrollment covered by the loan
• Loan’s academic year: period used to track annual loan limits (SAY/BBAY)
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Example 3: Subsidized Usage Period
• Semester-based program with fall and spring SAY• Student borrows fall and spring semesters• Loan period: August 23, 2013 – May 6, 2014
– 257 days• Academic year: August 23, 2013 – May 6, 2014
– 257 days
Days in loan period
Days in academic year
Subsidized usage period
= 1.0 year257
257= =
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Example 4: Subsidized Usage Period
• Semester-based program with fall and spring SAY• Student borrows fall semester only• Loan period: August 23, 2013 – December 12,
2013– 112 days
• Academic year: August 23, 2013 – May 6, 2014– 257 days
(rounded down to .25 year)
Days in loan period
Days in academic year
Subsidized usage period
= .44 year112
257= =
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Enrollment Status Exception
• Calculated subsidized usage period is prorated by enrollment status:
– ¾ time = .75
– ½ time = .50
• Proration occurs before any rounding
• One scenario where this is not applicable
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Example 3 Again: Subsidized Usage Period
• Semester-based program with fall and spring SAY• Student borrows fall and spring semesters, but at
half-time status• Loan period: August 23, 2013 – May 6, 2014
– 257 days• Academic year: August 23, 2013 – May 6, 2014
– 257 days
Days in loan period
Days in academic year
Subsidized usage period
= 1.0 yr x .50 = .5 yr
257
257= =
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Annual Loan Limit Exception
• Only scenario where the amount borrowed matters
• When student receives the full subsidized annual loan limit for a period less than 1 AY in length, subsidized usage period is = 1 year
• Only happens in standard-term programs or non-standard-term programs where terms are substantially equal and at least 9 weeks in length
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Example 4 Again: Subsidized Usage Period
• Semester-based program with fall and spring SAY
• Third-year student borrows fall semester only, $5,500
• Loan period: August 23, 2013 – December 12, 2013
– 112 days
• Academic year: August 23, 2013 – May 6, 2014
– 257 days
Student borrowed full annual loan limit so usage = 1.0 year
Subsidized usage period
= .44 year= =Days in loan period
Days in academic year
112
257
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Loss of Subsidized Loan Eligibility
Maximum eligibility period
– All subsidized usage periods
= Remaining eligibility period
• Student loses subsidized eligibility when remaining eligibility period is zero or less
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Remaining Eligibility Period
How much subsidized loan eligibility a borrower has remaining
• Eligibility lost when zero or less
• ED calculates
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Example 5: Remaining Eligibility Period
• Student receives 2 full years of subsidized loan while enrolled in a 2-year AA program
Maximum eligibility period (3 years)
– All subsidized usage periods (2 years)
= Remaining eligibility period (1 year)
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Example 6: Remaining Eligibility Period
• Student receives 2 full years of subsidized loan while enrolled in a 2-year AA program and then transfers to 1-year certificate program
After year 2 in AA program
Upon transferto 1-year certificate
Maximum eligibility period
3 years 1.5 years
Subsidized usage period 2 years 2 years
Remaining eligibility period
1 year-.5 years
No remaining eligibility
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Example 7: Remaining Eligibility Period
• Student receives 3 full years of subsidized loan while enrolled in a 2-year AA program and then transfers to 4-year BA program
After year 2 in AA program
Upon transfer to 4-year BA
program
Maximum eligibility period
3 years 6 years
Subsidized usage period 3 years 3 years
Remaining eligibility period
0 No remaining eligibility
3 years
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Loss of Interest Subsidy
Student subject to the 150% limit can lose interest subsidy on all outstanding subsidized loans if:
• Has no remaining eligibility period;
• Did not complete the program; and
• Continued enrollment at least half time in certain circumstances
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Loss of Interest Subsidy
• Subsidy loss effective on date of triggering enrollment (not retroactive)
• Enrollment is trigger, not borrowing another loan
• No subsidy loss if enrollment is in:
– Graduate or professional program
– Prep coursework for enrollment in graduate or professional program
– Teacher certification program where school does not award credential
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Loss of Interest Subsidy
• Lost subsidy applies to all periods during which a subsidy would apply (grace, deferment, etc.)
• A loan which loses its subsidy is still a subsidized loan
– Not as significant now that subsidized loans and unsubsidized loans have same interest rate
• A student may at some later point regain sub eligibility (e.g., by enrolling in a longer program), but a lost subsidy on an individual prior loan can never be regained
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Example 8: Loss of Interest Subsidy
• Student receives 3 full years of subsidized loan while enrolled in a 2-year AA program. Student does not complete and enrolls for a 4th year
No remaining eligibility period;
Did not complete; and
Continued enrollment
• Therefore, loss of interest subsidy
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Example 9: Loss of Interest Subsidy
• Student receives 3 full years of subsidized loan while enrolled in a 2-year AA program. Student does not complete and enrolls in a 4-year BA program
End of 3rd yearin AA program
Upon transferto 4-year BA
program
Maximum Eligibility Period
3 years 6 years
All subsidized usage periods
3 years 3 years
Remaining eligibility period
0 3 years
Subsidy loss?No, student hasn’t
re-enrolledNo, student has
remaining eligibility
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Preparatory Coursework
For enrollment in an undergraduate
program
For enrollment in a graduate program
Maximum eligibility period
150% of the program for which prep coursework is
preparing student
150% of the program for which the borrower most recently received
subsidized loan
Do subsidized usage periods count against
maximum eligibility period?
Yes Yes
Can enrollment cause loss of interest
subsidy?Yes No
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Teacher Certification Programs
Definition: programs that do not lead to degree or credential from school, but lead to credential from state that is required for teaching
• Subsidized usage periods from teacher cert programs do not count against maximum eligibility periods for non-teacher cert programs, and vice versa
• Borrower can’t lose interest subsidy on non-teacher cert loans by enrolling in a teacher cert program
• Teacher cert loans never lose interest subsidy
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Unsubsidized Loan Eligibility
Student cannot receive unsubsidized loan eligibility for a loan period until the student has received all subsidized loan for which he or she is eligible
• Longstanding rule
• Ensures student receives most beneficial loan first
• Prevents circumvention of 150% rules
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School Reporting Requirements for 2013–14 and Beyond
To COD
• Loan period dates
• Loan’s academic year dates
• See GEN-13-13
To NSLDS
• Enrollment status: at least half-time or full-time
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School Reporting Requirements for 2014–15 and Beyond
To COD
• CIP
• Credential level
• Program length
• Length of Title IV academic year
• Flags for prep coursework and teacher certification
• Enrollment status (full time, ¾ time, half time)
• Payment period begin date
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School Reporting Requirements for 2014–15 and Beyond
To NSLDS
• CIP
• Credential level
• Program length
• Length of Title IV academic year
• Flags for prep coursework and teacher certification
• Enrollment status (full time, ¾ time, half time)
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Loan Counseling
• Entrance and exit counseling must include information on 150% subsidized limit for first-time borrowers completing counseling on or after July 1, 2013
• Recommended that first-time borrowers who completed counseling before July 1, 2013 also receive updated information
• As of June 28, studentloans.gov contains a link to a PDF of the required information on 150% limit
• As of October, required information will be fully incorporated into ED’s online counseling
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Resources
• NASFAA articles: search on “150%” from www.nasfaa.org
• Recording and handout from ED session at NASFAA conference: http://www.nasfaa.org/conference/videos.aspx
• Federal Register 5/16/13: interim final rules
• GEN-13-13: reporting and updating of loan periods and academic year
• ANN-13-08: links to recordings of ED webinars offered in June
• Electronic announcements: 5/16/13, 6/20/13, 8/30/13
