National Association of Student Financial Aid Administrators The following is a presentation prepared for: VASFAA

2 Karen McCarthy Division of Policy and Federal Relations

© 2013 NASFAA3 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 NASFAA4 Background: How Did We Get Here? Moving Ahead for Progress in the 21 st 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

© 2013 NASFAA5 Background: How Did We Get Here? Interim Final Rules Published May 16, 2013 Effective immediately Comment period until July 1, 2013

© 2013 NASFAA6 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

© 2013 NASFAA7 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!

© 2013 NASFAA8 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

© 2013 NASFAA9 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

© 2013 NASFAA10 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

© 2013 NASFAA11 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)

© 2013 NASFAA12 Maximum Eligibility Period - Examples Program Length Maximum Eligibility Period 2-year associate’s degree3 years 2-year certificate3 years 1-year certificate1.5 years

© 2013 NASFAA13 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

© 2013 NASFAA14 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

© 2013 NASFAA15 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)

© 2013 NASFAA16 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 year 257 ==

© 2013 NASFAA17 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 year ==

© 2013 NASFAA18 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

© 2013 NASFAA19 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 ==

© 2013 NASFAA20 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

© 2013 NASFAA21 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

© 2013 NASFAA22 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

© 2013 NASFAA23 Remaining Eligibility Period How much subsidized loan eligibility a borrower has remaining Eligibility lost when zero or less ED calculates

© 2013 NASFAA24 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)

© 2013 NASFAA25 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 transfer to 1-year certificate Maximum eligibility period 3 years1.5 years Subsidized usage period2 years Remaining eligibility period 1 year -.5 years No remaining eligibility

© 2013 NASFAA26 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 years6 years Subsidized usage period3 years Remaining eligibility period 0 No remaining eligibility 3 years

© 2013 NASFAA27 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

© 2013 NASFAA28 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

© 2013 NASFAA29 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

© 2013 NASFAA30 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 4 th year No remaining eligibility period; Did not complete; and Continued enrollment Therefore, loss of interest subsidy

© 2013 NASFAA31 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 3 rd year in AA program Upon transfer to 4-year BA program Maximum Eligibility Period 3 years6 years All subsidized usage periods 3 years Remaining eligibility period 03 years Subsidy loss? No, student hasn’t re-enrolled No, student has remaining eligibility

© 2013 NASFAA32 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 Can enrollment cause loss of interest subsidy? YesNo

© 2013 NASFAA33 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

© 2013 NASFAA34 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

© 2013 NASFAA35 School Reporting Requirements for 2013–14 and Beyond To COD Loan period dates Loan’s academic year dates See GEN To NSLDS Enrollment status: at least half-time or full-time

© 2013 NASFAA36 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

© 2013 NASFAA37 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)

© 2013 NASFAA38 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

© 2013 NASFAA39 Resources NASFAA articles: search on “150%” from Recording and handout from ED session at NASFAA conference: 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

© 2013 NASFAA 40 Please send your questions to: