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Nautochia Webb October 28, 2015
U.S. Department of Education
Awarding & Processing Direct Loans
NYSFAAA
Agenda
Direct Loan BasicsAcademic YearSubsidized Usage Limit Applies (SULA)CalculationsProrating Annual Loan LimitsTransfer StudentsResources
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Direct Loan Basics
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Direct Loan Basics
• William D. Ford Federal Direct Loan Program (“Direct Loan” or “DL”)
• Loan types include• Subsidized Stafford (Sub) - Only for undergraduates
• Unsubsidized Stafford (Unsub) - For undergraduates, graduates, and professional students
• PLUS Loan for Graduate and Professional Students (unsubsidized)
• PLUS Loan for Parents (unsubsidized) - For parents of dependent students
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• Regulations at 34 C.F.R.§685 (link from IFAP)
• Source of funds is the U.S. Treasury• Money is transmitted via ED’s G5
system• Signed MPN or eMPN required• Counseling required – Entrance &
Exit
Direct Loan Basics
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Loan Limits
Students are subject to annual and aggregate loan limitsDependent upon the student’s financial aid package, student may not be eligible to borrow the full amount
Annual Loan Limits
YearDependent
Undergraduate
Independent Undergraduate
And Dep. Undergrad whose parent can’t borrow PLUS
Graduate/ Professional
Student1st $5,500
(maximum $3,500 subsidized)
$9,500(maximum $3,500
subsidized)
Up to $20,500 each academic year
(all unsubsidized)
2nd $6,500(maximum $4,500
subsidized)
$10,500(maximum $4,500
subsidized)
3rd and Beyond
$7,500(maximum $5,500
subsidized)
$12,500(maximum $5,500
subsidized)
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Aggregate Loan Limits
Dependent Undergraduate
$31,000 combined sub/unsubNo more than $23,000 in sub
Independent Undergraduate*
$57,500 combined sub/unsubNo more than $23,000 in sub
Grad/Professional $138,500 combined sub/unsubNo more than $65,500 in sub
* Also for dependent students whose parents are unable to obtain a PLUS loan
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General Loan Awarding Principles
Must award subsidized before awarding unsubsidizedBase Amount may be all subsidized, all unsubsidized, or a combination.
Subsidized amount may not exceed the Base AmountAnnual Loan Limit includes the Base Amount and Additional Unsubsidized
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Reminder: All general Title IVstudent eligibility requirements
also apply
Student must:• Be enrolled at least half-
time• Meet eligibility
requirements, except for:• Preparatory
coursework • Teacher certification
coursework
School must:– Determine Pell eligibility
before loans – Determine loan eligibility
• Subsidized eligibility before Unsubsidized
• No Adverse Credit history for PLUS borrowers
• Aggregate limits• Other Title IV eligibility
requirements
General Direct Loan Requirements
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Direct Loan Interest Rates – 2015-16Direct Loans first disbursed on or after July 1, 2015 but before July 1, 2016
• Undergrad Sub and Unsub – 4.29% (cap 8.25%)
• Grad Unsub – 5.84% (cap 9.5%)
• PLUS – 6.84% (cap 10.5%)
• Consolidated Loans – weighted average of underlying loans rounded up to the next higher one-eighth of one percent (no cap)
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Direct Loan Fees – 2015-16
Direct Loan Feesfor FY 2015 and FY 2016
Loan Type Impacted Loans Loan FeePercent
Fee Example
Direct SubsidizedLoans and Direct
UnsubsidizedLoans
FY 2015First disbursed on or after
October 1, 2014 and beforeOctober 1, 2015
1.073 $59.01 on a$5,500 loan
FY 2016First disbursed on or after
October 1, 2015 and beforeOctober 1, 2016
1.068 $58.74 on a$5,500 loan
Direct PLUSLoans (Parentand Grad/Prof
Student
FY 2015First disbursed on or after
October 1, 2014 and beforeOctober 1, 2015
4.292 $429.20 on a$10,000 loan
FY 2016First disbursed on or after
October 1, 2015 and beforeOctober 1, 2016
4.272 $427.20 on a$10,000 loan
Loan fee calculations that result in more than two decimal places must be truncated (not rounded) to two digits after the decimal point (cents)
Direct Loans first disbursed on or after July 1, 2015 but before July 1, 2016
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Subsidized Stafford Loan Eligibility• Subsidized loans are need-based
COA – EFC – EFA = Loan Eligibility (Up to the Annual Subsidized Amount)
• Interest is subsidized during:• In-School
• Grace periods
• Deferments
• School must determine eligibility before eligibility for unsubsidized loans
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Limit on how many years a “first-time borrower” may receive subsidized loans.
Applies to first-time borrowers on or after July 1, 2013. A first-time borrower is one who –
Has no balance on any FFEL or Direct Loan on July 1, 2013, or
Receives first Direct Loan (any type) on or after July 1, 2013
Subsidized Loan Eligibility Limit or
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Condition - When student has received Direct Subsidized loans for a period of time that is equal to 150% of the published length of the student’s current academic program
Result - Student may not receive additional subsidized loans for enrollment in that program or any program of equal or lesser length
Subsidized Loan Limit – 150% Rule
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Students maximum time to receive subsidized loans is established based on the length of the program the student is enrolled in
Remaining subsidized eligibility is calculated by subtracting from maximum eligibility for the program, the time the student has already received subsidized loans for enrollment in any program
Subsidized Loan Limit – 150% Rule
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Determining When 150% Limit is Met
Maximum
Eligibility
Period
Total
Subsidized
Usage
Periods
Remaining*
Eligibility
Periods
*150% Limit is met when Remaining Eligibility Period equals zero or less than zero
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Determining When 150% Limit is Met
Remaining Eligibility < 1 year:
Students can receive Direct Subsidized Loan if:
• The school can originate a Direct Subsidized Loan in compliance with all Direct Loan origination rules as provided in the regulations at 34 CFR 685.301, with particular attention to the applicable minimum loan period rules, and
• The loan's loan period, academic year, enrollment status, and loan amount results in a Subsidized Usage Period that is equal to or less than the student's Remaining Eligibility Period
For questions about the 150% limit, please email 150Percent-Questions@ed.gov.
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Determining When 150% Limit is Met
COD Reporting = Accurate Enrollment Reporting
• All pending Direct Loan disbursements were reduced to zero.
• All loan amounts equal the total amounts disbursed.
• The borrower’s correct enrollment status was reported.
• Loan period have been adjusted to include only those payment periods (terms) for which the borrower received and retained an actual disbursement.
• Academic year dates reflect the defined length of a program’s academic year, and the dates were adjusted, when or if appropriate.
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Unsubsidized Stafford Loan Eligibility
• Unsubsidized loans are not need-based
COA – EFA = Unsubsidized Loan Amount (Not to exceed the annual loan limits)
• May replace EFC in packaging
• Borrower is responsible for interest• May be paid or may allow to capitalize
• School determines eligibility AFTER awarding subsidized loans
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Direct Unsubsidized Loan Eligibility
Student can only receive an unsubsidized loan (base or additional) for a loan period if the student has been awarded the full amount of his or her eligibility for a subsidized loan
Student who is not awarded his or her full subsidized loan eligibility may not receive any unsubsidized loan for the same loan period
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Unsubsidized Loan Flexibility
• For dependent Undergraduates whose parents are unable to borrow PLUS loans
• Due to adverse credit or• Due to exceptional circumstances
• May receive additional DL funds (same amounts as Independent Undergraduates)
• Flexibility extends for one Academic Year
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Unsubsidized Loan Flexibility
• FAA may use PJ to award Unsubsidized loans to dependent students without parental data• Parent must certify cessation of support and refusal
to complete the FAFSA• School must document both items• Not a Dependency Override (D/O)
• Student may receive up to his/her maximum dependent loan eligibility (Unsubsidized)
• Student not eligible for any other Title IV aid
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PLUS Loans
PLUS Loans:• May replace EFC• Have no Annual/Aggregate limit• Borrower must have no adverse credit• School must offer Sub and Unsub before awarding
PLUS• Amounts may not exceed COA – EFA
Available for:• Parents of dependent undergrads• Graduate/professional students
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Refusal to award a Loan
In Direct Loan Subsidized, Unsubsidized, and PLUS, a school has the authority to –
• Refuse to originate loan or• Originate a loan at less than the amount
requested by the student
• Must be done on an individual student basis• Must provide student with written explanation
34 CFR 685.301(a)(8) 25
Awarding Subsidized Loans
COA – EFC – EFA = Need
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Subsidized Eligibility - Tom
Subsidized Loan can be up to $3,500 of $5,500, but cannot exceed need
• EFA is:• Pell of $4,580• Scholarship of $6,500
• Remaining Need = $2,720
Tom is a 1st year DependentStudent(Annual Loan Limit = $5,500)
COA $15,000- EFC 1,200- EFA $11,080=Sub DL $ 2,720
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Awarding Unsubsidized Loans
COA – EFA = Eligibility
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Unsubsidized Eligibility - Tom
Unsubsidized Loan can be up to $2,780 ($5,500 - $2,720 in sub), but total aid cannot exceed COA
• EFA is:• Pell of $4,580• Scholarship of $6,500• Sub Loan of $2,720
• Remaining Eligibility = $1,200
Tom is a 1st year DependentStudent(Annual Loan Limit = $5,500)
COA $15,000- EFA $13,800=Unsub DL $ 1,200
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Awarding PLUS
COA – EFA = Eligibility
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Patrick’s Parent PLUS Eligibility
Patrick - 1st year Dependent student:
COA $20,000-EFA $9,500=PLUS eligibility$10,500
• Loan limit = COA-EFA• EFA now includes
– $4,000 Pell – $3,500 Subsidized loan– $2,000 Unsubsidized loan
• EFC not considered• Patrick’s parents may
borrow $10,500
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Patrick’s Increased Unsubsidized Eligibility:(If Parents denied PLUS, or if Patrick were
Independent)
Patrick - 1st year student (loan limit $9,500)
COA $20,000- EFA $7,500= Remaining Need $12,500
EFA includes:– $4,000 Pell– $3,500 Subsidized loan
• EFC not considered
• Patrick may borrow the lesser of:
• COA – EFA = $12,500 , or
• $9,500 - $3,500 = $6,000 (Annual Loan Limit-Sub Limit = Eligibility)
In an Unsubsidized loan
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Scheduled Academic Year (SAY)
Fixed period of time, usually corresponds to school’s official academic calendarGenerally begins at same time each yearExample – fall/winter/spring or fall/springSummer term may be either a “header” or “trailer”Summer mini-sessions may be treated as single term or individual terms
Scheduled Academic Year (SAY)
Loan period may include only portion of SAYPrograms offered in SAY may
Use BBAYAlternate between SAY and BBAY provided academic years do not overlapOnce SAY has passed, student is eligible for new annual loan limit
Borrower-Based Academic Year
Does not have fixed beginning and ending dates
“Floats” with student’s attendance and progressionBBAY must be used for any program that does not meet definition of program allowed to use SAY
Who Can Use Either and/or Both?
Credit-hour programs offered in a Scheduled Academic Year
SAY uses a traditional academic calendar with at least two semesters/trimesters or three quarters in fall through spring, ORComparable academic calendar with nonstandard SE9W terms
Each term is at least 9 weeks in lengthTerm lengths are within 2 weeks of each other
Scheduled Academic Year (SAY) Standard Term-based Program
2-Year Semester-Based Credit-Hour Program
Academic year = 24 Credits and 30 Weeks
Fall Spring
1st SAY
$3,500*
Fall Spring
2nd SAY
$4,500*
* Student in this example is a first-year dependent student who chooses to borrow only the base amount
SAY Eligibility for New Annual Loan Limit: Example 1
Fall Spring
1st SAY
$3,500*
Fall Spring
2nd SAY
$3,500*
Loan Period 1
• *Student in this example is a first-year dependent student who chooses to borrow only the base amount.
• Student does not advance to next grade level.
Loan Period 2
SAY Eligibility for New Annual Loan Limit: Example 2
Fall Spring
SAY
$5,500
Fall Spring
SAY
$4,500
Summer
Loan Period 1
Loan Period 2
Loan Period 3
$1,000* $3,500* $5,500*
• Student in this example is a second-year dependent student who chooses to borrow only the base amount.
• Student advances a grade level from Summer to Fall and chooses again to borrow only the base amount.
Borrower Based Academic Year 1(BBAY1)
Standard term credit-hour programs and comparable academic calendars with nonstandard SE9W may use BBAY1
BBAY must include the same number of terms as the school’s definition of an academic year
Student becomes eligible for new annual loan limit after BBAY calendar period has elapsed
BBAY1
Floats with student’s enrollment, but student must attend first term of BBAYMini-sessions must be combined as single termIf BBAY includes summer, may be shorter in weeks/hours than statutory academic year definition
Full-time must be defined as 12 credits
BBAY1Standard Term-based Program
Two Year Semester-Based Credit-Hour Program
Academic year = 24 Credits and 30 Weeks
1st BBAY
$3,500
2nd BBAY
$4,500
Spring 15 weeks
Summer 10 weeks
• Student in this example is a first-year dependent student who chooses to borrow only the base amount.
• Student advances a grade level from spring to summer by completing enough credits to do so.
Fall 15 weeks
Fall 15 weeks
BBAY1Standard Term-based Program
Two Year Semester-Based Credit-Hour Program
Academic year = 24 Credits and 30 Weeks
Spring Summer
1st BBAY
$3,500
Fall Spring
2nd BBAY
$4,500
• Student in this example is a first-year dependent student who chooses to borrow only the base amount.
• Student advances a grade level from summer to fall by completing enough credits to do so.
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Grade Level Progression
Completion of credits determines grade level progressionDo not confuse grade level progression with eligibility for a new annual loan limit Schools may develop own grade level standards but at a minimum must equal the minimum academic year definition Students in standard or nonstandard SE9W programs who advance to a higher grade level within an academic year may receive additional funds
Grade Level Progression in the Same Academic Year
Students in programs offered in standard terms or nonstandard SE9W terms who advance to a higher grade level within an academic year may receive additional funds
Prorating Annual Loan Limits
Annual loan limits must be prorated whenThe student is enrolled in a program that is shorter than a full academic year orThe student is enrolled in a remaining period of study shorter than a full academic year
For standard and nonstandard SE9W terms, if the remaining period contains fewer terms than in the school’s defined academic year
Loan Proration
Required for periods of study shorter than full academic year only when known in advance
No retroactive proration required when student originally enrolls for full year but completes program earlier
Loan Proration
Prorated loan limits are then used in the awarding process to determine student eligibility
Proration is NOT required for PLUS loansGraduate studentsTeacher certificationPreparatory coursework
Prorating for a Program Shorter Than a Full Academic Year
Multiply the applicable loan limit by the lesser of:
Hours enrolled in programHours in the defined academic year
Or
Weeks enrolled in programWeeks in the defined academic year
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Program Shorter Than an Academic Year
Program Length is 22 credit-hours and 28 weeks Defined academic year is 24 credit-hours and 30 weeks
Credits 22 = .92 24
Weeks 28 = .93 30
Annual Base Amount
$3,500 X 22 = $3,20824
Annual Unsubsidized (above base)
$2,000 X 22 = $1,833 dependent
$6,000 X 22 = $5,500 independent
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24
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EFC and COA Must Reflect Loan Period
Loan amounts for periods that are not equal to one academic year must be prorated
The EFC that most reasonably corresponds to the number of months in the loan period must be used to award the loan
The COA that reflects the costs incurred during the loan period must be used
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Prorating Remaining Periods Shorter than an Academic Year
Multiply the applicable loan limit by:
Hours remaining in program of studyHours required for defined Academic Year
Unlike proration for programs shorter than an academic year, only the hours are used.
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Remaining Periods Shorter Than an AY
6 credits 15 weeks
Remaining Portion of program must be
prorated
Program length is 30 semester credit-hours and 45 weeks
Academic year defined as 24 credit-hours and 30 weeks
Year 2 Loan Limits
Year 1 Loan Limits 12 credits 15 weeks
12 credits 15 weeks
Annual Base Amount
$4,500 X 6 = $1,12524
Annual Unsubsidized (above base)
$2,000 X 6 = $500 dependent
$6,000 X 6 = $1,500 independent
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24
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Single Term Loans
A single term loan is one with a loan period of just one semester, trimester or quarter
Must use COA, EFC and EFA for only that one term to calculate loan eligibility
Multiple disbursement required unless school is exempt due to low cohort default rates
Overlapping Academic Years–Transfer Students
Must adjust loan for any amounts received in previous program if academic year overlaps new school’s academic year
Initially restricted to grade level annual loan limit at transfer school minus funds used at original school
Ineligible for new loan limit until student completes academic year from original school
Transfer Student Example #1Original School
9/8/15 5/13/16
Withdraws11/13/15
Loan Limit $3,500 / $2,000
Spring
Transfer School
11/17/15 5/20/16
Remaining $1,750 / $1,000
Winter Spring
Eligible for New Loan Limit
Fall Sub: $1,750Unsub: $1,000
Withdrawn Not Disbursed
Sub: $875 Unsub: $500
Sub: $875 Unsub: $500
Transfer Student Example #1Original School – Semester BasedLoan Period: 9/8/2015 to 5/13/2016
Grade Level One Dependent: $3,500/$2,000
Student Withdraws : 11/13/15
Amount Disbursed: $1,750 / $1,000
Transfer School – Quarter BasedStart Date: 11/17/15
Grade Level One Dependent: $3,500/$2,000
Winter Quarter: 11/17/15 to 2/19/16
Spring Quarter: 2/22/16 to 5/20/16
Amount Disbursed: $1,750/$1,000
Transfer Student Example #2
Original School
9/8/15 5/13/16
Withdraws12/11/15
Sub: $2,250
Unsub: $1,000
Withdrawn
Not Disbursed
Loan Limit $4,500/$2,000
FALL Spring
Transfer School
1/12/16 5/27/16
Sub: $1,250
Unsub: $1,000
Loan Limit $3,500 / $2,000
Spring
Eligible for New Loan
Limit
First year Student at School B
Sub: $3,500 – $2,250
Remaining = $1,250
Unsub: $2,000 – $1,000
Remaining = $1,000
Transfer Student Example #2Original School – Semester Based
Loan Period: 9/8/2015 to 5/13/2016
Grade Level Two Dependent: $4,500/$2,000
Student Withdraws 12/11/15
Amount Disbursed: $2,250/$1,000
Transfer School – Semester Based
Start Date: 1/12/16
Student doesn’t have enough credits to be grade level two at this school
Grade Level One Dependent: $3,500/$2,000
Loan Period: 1/12/16 to 5/27/16
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Obtaining Academic Year Dates
A school can obtain specific begin and end dates of the prior school’s academic year by:
obtaining documentation from the prior school, ORlook for the academic year dates of Direct Loans originated by the prior school on the “award detail information page” in COD
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Transfer Student Example
School A’s Academic Year
9/18/14
Withdrew11/29/2014
School B Loan Period12/15/14
3/13/15
3/13/15 0School B: New Loan period may begin on 3/14/15
School A: Used $1,750 Sub and $1,000 Unsub
School B: Student eligible for remaining $1,750 Sub and $,1000 Unsub
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Transfer Student Example
• Student attends School A with an academic year beginning 9/18/14 and ending 3/13/15
• Student withdraws from School A on 11/29/14• As grade level 1 student, this student received $1,750 in
Sub and $1,000 in Unsub• Student begins attendance at School B as a grade level 1
student on 12/15/14
Student may only receive remaining portion of loan not used until completion of School A’s academic year
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Resources
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ResourcesFSA HandbookVolume 3, Chapters 1 and 5
Dear Colleague Letters and Electronic AnnouncementsFederal Register dated May 16, 2013 (FR 28953)Electronic Announcement #19 (Updated October 8, 2015)Electronic Announcement #20 (October 19, 2015)
Site Linkshttps://studentaid.ed.gov/types/loanshttps://studentloans.gov
Direct Loan Training on IFAPwww2.ed.gov/offices/OSFAP/training/specific.html
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Questions?
Thank
You!
Contacts
New York School Participation Team Main Number: 646-428-3750
New York Training Officer Nautochia Webb: 646-428-3758
Nautochia.Webb@ed.gov
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