1. Student Loans 101 Becky Collins GuidEd Solutions A Division of SLGFA April 7, 2016 Becky Collins GuidEd Solutions A Division of SLGFA April 7, 2016

2. Need-based loans Limited to undergraduate students Interest does not accrue when student is: – Enrolled at least half-time; – In grace period; or – In deferment status Interest Rate for 2015-16 is 4.29% Repayment begins six months after student ceases half-time enrollment Subsidized Loan 2

3. Non-need based loans Student responsible for interest during in-school, grace and deferment period May pay interest as it accrues, or have interest capitalized Interest rate for 2015-16 is 4.29% for undergraduate and 5.84% for graduate and professional students Repayment begins six months after student ceases half-time enrollment Unsubsidized Loan 3

4. PLUS loans are not need-based Two types of borrowers: – Parents of dependent students – Graduate and professional students May borrower up to: Cost of attendance (COA) - Estimated Financial Assistance (EFA) Loan Amount PLUS Loan 4

5. Borrower is responsible for all interest payments Based upon favorable credit history Interest rate for 2015-16 is 6.84% Repayment usually begins within 60 days of date loan is fully disbursed PLUS Loan 5

6. Origination fees – Subsidized and unsubsidized loans for 2015-16 the fee is 1.68% – PLUS loans for 2015-16 the fee is 4.272% Origination Fees 6

7. Annual and aggregate loan limits Grade level Dependency status May not originate more than the: – Amount borrower requests – Borrower’s cost of attendance – Borrower’s unmet financial need – 150% loan eligibility limitation Determining Loan Amounts 7

8. The period of enrollment to which the loan applies Minimum: one academic term (e.g. a semester) Maximum: generally the academic year Loan Period 8

9. Refusing to Originate a Loan May refuse to originate or originate for a lesser amount Case-by-case Does not constitute a pattern of denying access based on race, sex, color, income, religion, national origin, age or handicapped status Cannot engage in practice of originating to cover school charges only Must document and provide explanation to the student in writing 9

10. Loan Origination Checklist Must document: – Cost of Attendance (COA) – Expected Family Contribution (EFC) – Estimated Financial Assistance (EFA) Must confirm that the borrower is an eligible borrower Determine Pell Grant eligibility 10

11. Loan Origination Checklist For unsubsidized loans – determine eligibility for subsidized loans Prorate the annual loan limit for an undergraduate enrolled in a program or remaining period of study that is shorter than an academic year 11

12. $3,500 combined Subsidized and Unsubsidized plus $2,000 additional unsubsidized for dependent first-year undergraduates $4,500 combined Subsidized and/or Unsubsidized plus $2,000 additional Unsubsidized for dependent second-year undergraduates $5,500 combined Subsidized and Unsubsidized plus $2,000 additional Unsubsidized for dependent third, fourth, and fifth-year undergraduates Annual Loan Limits 12

13. Examples – Dependent first-year undergraduate may receive up to $5,500 in Subsidized and Unsubsidized loan for a signal academic year, but no more the $3,500 may be subsidized – Dependent first-year undergraduate who has no Subsidized loan eligibility could receive up to the full $5,500 in Unsubsidized loans Annual Loan Limits 13

14. Annual Loan Limits There are higher additional unsubsidized limits for independent undergraduate students and students whose parents can’t get a PLUS loan – $3,500 subsidized and/or unsubsidized + $6,000 unsubsidized = $9,500 – first-year – $4,500 subsidized and/or unsubsidized + $6,000 unsubsidized = $10,500 – second-year – $5,500 subsidized and/or unsubsidized + $7,000 unsubsidized = $12,500 – third-year and beyond 14

15. Graduate and professional students are not eligible for subsidized loans for periods that begin on/after July 1, 2012. Annual loan limit is $20,500 in unsubsidized loans PLUS loan limits for parents and graduate/professional students – no fixed limit –May borrow up to student’s COA - EFA Annual Loan Limits 15

16. Annual Loan Limit Progression Academic year is used as the basis for the student’s annual loan limits Loan period is often equivalent to an academic year, but not always 16

17. Academic Years Two types of academic years – Scheduled Academic Year (SAY) – Borrower-Based Academic Year (BBAY) SAY – Corresponds to a traditional academic year, e.g. fall and spring semesters BBAY – Doesn’t have fixed beginning and ending date BBAY floats with a student’s attendance and progression 17

18. Grade Level Progression Generally set according to the school’s academic standards Progression to a higher grade level doesn’t always coincide with the beginning of a new academic year 18

19. Grade Level Progression If student has borrowed up to the annual loan limit within an academic year he/she can receive additional loan funds if they progress to a new grade level with a higher annual loan limit during the same academic year 19

20. Grade Level Progression Example – Dependent student classified as a second-year undergraduate student in the fall – Received first disbursement of $3,250 for fall/spring – Progresses to third-year grade level at the end of the fall term – Annual loan limit is now $7,500 – If student as sufficient financial need, they would be eligible for the remaining amount which is $4,250 20

21. Grade Level Progression New annual loan limit for the same grade level – If 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 – If student is maintaining satisfactory academic progress they could receive the maximum annual loan limit for a first-year undergraduate while completing the first year of the program 21

22. Loan Proration Must prorate loan for undergraduate students enrolled in – Program of study shorter than an academic year – In a program that is one academic year or more in length, but is in a remaining period of study that is shorter than a full academic year 22

23. Loan Proration Questions to ask: – Is student in a program shorter than an academic year or a remaining period of enrollment? – If program is academic year or longer, is remaining period of enrollment shorter than academic year? – What portion of the academic year remains to be completed? – What portion of annual loan limit may student borrower for remaining period of enrollment? 23

24. Loan Proration Programs shorter than a full academic year in length Semester, trimester, quarter, or clock-hours enrolled Semester, trimester, quarter, or clock-hours in the academic year Or Weeks enrolled in program Weeks in the academic year 24

25. Loan Proration Remaining period of study shorter than an academic year Semester, trimester, quarter, or clock-hours enrolled Semester, trimester, quarter, or clock-hours in the academic year Unlike proration for programs that are shorter than an academic year, there is no comparison of weeks and hours. 25

26. Loan Proration Example Fourth-year student in final period of enrollment Academic year contains 2 semesters Remaining period is Fall semester Dependent undergraduate student taking 18 hours Academic year = 24 credits and 30 weeks 18/24 =.75 $5,500 x.75 = $4,125 $2,000 x.75 = $1,500 Total prorated limit = $5,625 26

27. Aggregate Loan Limits $31,000 for dependent undergraduate (no more than $23,000 may be subsidized) $57,500 for independent undergraduate student (or dependent undergraduate whose parent does not qualify for PLUS). No more the $23,000 may be subsidized $138,500 for graduate and professional student (including loans for undergraduate study). No more than $65,500 may be subsidized 27

28. Subsidized Loan Eligibility Time Limitation – AKA 150% Rule 28

29. Subsidized Loan Eligibility Time Limitation (150% Rule) The 150% Subsidized loan limitation is a limitation on the amount of time for which a borrower can receive subsidized loans Note “Periods” - not dollar amount Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 29

30. To Whom Does It Apply? To first-time borrowers who have no outstanding balance on a FFEL or Direct Loan when they receive a Direct Loan on/after July 1, 2013 30

31. Consequences of Meeting the 150% Limit Once a first-time borrower has received subsidized loans for a period equal to 150% of his/her current program of study – Loses eligibility to borrow additional subsidized loans – Is subject to the loss of interest subsidy on previously received subsidized loans 31

32. Terms You Need To Know Maximum Eligibility Period (MEP) Subsidized Usage Period (SUP) Remaining Eligibility Period (REP) Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 32

33. Maximum Eligibility Period Maximum Eligibility Period (MEP) is 150% of the published length of borrower’s current or upcoming program – Varies by program – Multiply published length of program by 1.5 – Measured in academic years or portions Maximum Eligibility Period 33

34. Maximum Eligibility Period Examples Program LengthMaximum Eligibility Period 5-Year Bachelor’s Degree X 1.57.50 Years 4-Year Bachelor’s Degree X 1.56.00 Years 2-Year Associate’s Degree X 1.53.00 Years 1-Year Certificate Program X 1.51.50 Years

35. Subsidized Usage Period A Subsidized Usage Period (SUP) 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 is received All Subsidized Usage Periods 35

36. Calculating Subsidized Usage Period Loan Period: Period of enrollment for which loan is intended Academic Year: Period used to track annual loan limits (SAY/BBAY)

37. Exceptions to the SUP Rule SUP always will be one year if the student: – Is enrolled in a credit-hour program offered in standard terms or nonstandard terms that are substantially equal and no term less than nine weeks; and – Receives the full annual loan limit for a loan period that is less than an academic year 37

38. Exception to the SUP Rule Enrollment status proration: – If borrower is enrolled for three-quarter or half-time, the calculated subsidized usage period is prorated by.75 or.5, respectively 38

39. Determining When 150% Limit Is Met 39

40. Maximum Eligibility Period Examples Program LengthMaximum Eligibility Period 5-Year Bachelor’s Degree X 1.57.50 Years 4-Year Bachelor’s Degree X 1.56.00 Years 2-Year Associate’s Degree X 1.53.00 Years 1-Year Certificate Program X 1.51.50 Years 40

41. Determining When 150% Limit Is Met Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less). 41

42. Remaining Eligibility Period (REP) 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) Loses eligibility for additional subsidized loans when remaining eligibility is zero or less 42 Remaining Eligibility Period

43. Example 1: Remaining Eligibility Period Student receives 5 full years of Direct Subsidized Loans while enrolled in a 4-year BA program. Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period Maximum Eligibility Period6 Years All Subsidized Usage Periods 5 Years Remaining Eligibility Period 1 Year 43

44. Example 2: Remaining Eligibility Period Student receives 3 years of Direct Subsidized Loans while enrolled in a two-year program. Student then transfers to a 4-year program. After year 3 of 2-year program Upon transfer to 4-year program Maximum Eligibility Period3 Years6 Years All Subsidized Usage Periods 3 Years Remaining Eligibility Period 0 Years3 Years Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 44

45. Loss of Interest Subsidy 45

46. Loss of Interest Subsidy Benefits on Previously Received Subsidized Loans A first-time borrower who has no remaining eligibility for subsidized loans, loses interest subsidy on subsidized loan if the borrower: – Did not complete the program; and – Continues enrollment on at least a half-time basis in the same program; or – Enrolls in another program of the same or shorter length on at least a half-time basis 46

47. Loss of Interest Subsidy 47 Based on enrollment, not borrowing or requesting aid Lost eligibility due to 150% limit Did not complete program Enrolls in program of equal or shorter length Subsidy loss

48. Loss of Interest Subsidy 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. 48 Interest accrued before subsidy loss Interest accrued after subsidy loss ED’s responsibility Borrower’s responsibility

49. Loss of Interest Subsidy Benefits After losing interest subsidy, responsible for future accruing interest during: – Periods of at least half-time enrollment – Grace period – Deferment periods – Certain periods when repaying under Pay As You Earn and Income-based Repayment plans Lost interest subsidy cannot be regained 49

50. No Remaining Eligibility Period No CompletionEnrollsSubsidy Loss Example 1: Loss of Interest Subsidy Student received 6 years of Subsidized Loans while enrolled in a 4-year program. Student does not complete and enrolls for a 7 th year. Maximum Eligibility Period6 Years All Subsidized Usage Periods6 Years Remaining Eligibility Period0 Years Subsidy LossYes, enrolled with no remaining eligibility and without completing 50

51. Example 2: Loss of Interest Subsidy 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. Before transfer to 4-year program Upon transfer to 4-year program Maximum Eligibility Period3 Years6 Years All Subsidized Usage Periods 3 Years Remaining Eligibility Period0 Years3 Years Subsidy LossYes, borrower enrolled after eligibility loss. No, borrower enrolled in a longer 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. 51

52. No Remaining Eligibility Period No CompletionEnrollsSubsidy Loss Example 3: Loss of Interest Subsidy 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. End of year 5 of 4-year program Upon transfer to 2-year program Maximum Eligibility Period6 Years3 Years All Subsidized Usage Periods 5 Years Remaining Eligibility Period1 Year-2 Years Subsidy LossNo, borrower has remaining eligibility. Yes, transfer caused borrower to exceed max. eligibility. 52

53. Types of Enrollment that Never Cause Subsidy Loss Enrollment in a graduate or professional program Enrollment in preparatory coursework necessary for enrollment in a graduate or professional program Enrollment in a teacher certification program where school does not award an academic credential 53

54. Eligibility for Direct Unsubsidized Loans Is the student able to receive Direct Unsub. Loan? Did student receive all Direct Sub. Loans for which eligible? Yes Student may receive Direct Unsub. Loan No Student may NOT receive Direct Unsub. Loan A student cannot receive Direct Unsubsidized Loans for a loan period until the student has received all Subsidized Loan eligibility. 54

55. Resources Information for Financial Aid Professionals (IFAP) dedicated page includes: – FAQs – Dear Colleague Letters and Electronic Announcements – Training materials – Other resources Federal Student Aid Handbook 2015 Federal Student Aid Conference Training Materials NASFAA Training Materials 55

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